c 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 
GIFT  OF 

Rollin  I!.  Perkins 


^ 


THE 


LAW  OF  BUSINESS  PAPER 


AND 


SECURITIES 


A  Treatment  of  the  Uniform  Negotiable  Instruments  Act  for 
the  Lawyer,  the  Student  and  the  Business  Man,  With  Ex- 
planations of  the  Law  and  Citations  to  Decisions 
Interpreting    the    Act    and    Others    Upon 
Which   Its   Provisions   Were   Based 

TOGETHER  WITH 

A  Brief  Synopsis  of  the  Law  of  Collections  and  of  the  Acts 

Governing  Bills  of  Lading,  Warehouse  Receipts 

and  the  Transfer  of  Certificates  of  Stock. 


By  CHARLES  F.  DOLLE 

(Of  the  Cincinnati  Bar) 


1920 

T.  H.  FLOOD  &  COMPANY 

Publishers 

Chicago,  Illinois 


Copyright  1920 

By 

CHARLES  F.  DOLLE. 


0>> 


PREFACE. 


I  have  sought,  in  the  following  pages,  to  set  out  in  concise 
form  a  simple  and,  as  far  as  the  nature  of  the  subjects  would 
permit,  a  non-technical  treatment  of  the  Uniform  Acts  which 
govern  our  business  instruments.  Men  occupied  in  business 
and  in  finance  ma}'  find  it  interesting  and  useful. 

The  book  is  offered  to  business  men  and  to  young  men  get- 
ting an  education  in  business  and  in  the  law,  and  to  lawyers 
too,  although  the  members  of  the  bar  already  have  at  their 
disposal  technical  works  upon  the  same  subjects  written  by 
eminent  authors. 

Perhaps  I  should  have  resisted  more  strongly,  and  even 
declined  altogether,  the  request  of  the  publishers  to  address 
this  volume  to  lawyers  as  well  as  to  business  men  and  to  young 
men  getting  a  business  education  and  an  education  in  the  law, 
if  I  had  not  read  a  statement  by  the  author  of  a  treatise  on  the 
law  of  commercial  paper  that  his  three  large  volumes  on  this 
subject  might  never  have  been  written  if  the  Uniform  Nego- 
tiable Instruments  Law  had  been  enacted  before  their  publi- 
cation. This  is  a  tribute  to  the  authors  of  the  Act  which 
surely  justifies  the  unselfish  labor  spent  by  them  in  reducing  to 
a  few  pages  the  law  of  more  than  ten  thousand  cases. 

I  shall  not  hope  that  the  specialist,  or  even  the  mature 
lawyer,  will  find  of  much  benefit  the  explanations  I  have 
offered  at  each  section  of  the  Act.  These  may  be  unnecessary 
to  his  understanding  of  the  law.  But  he  will  find  in  them 
many  cross-references  that  will  help  him  to  visualize  at  one 
time  all  of  its  provisions  (some  in  widely  separated  sections), 
upon  any  question  into  which  he  may  be  inquiring,  and  if  he 
will  read  the  book  he  may  not  find  it  uninteresting. 

For  the  student  and  the  business  man  without  training  in 
the  law,  the  explanations  will  be  an  aid.  They  will  help  him 
to  better  understand  the  Act,  although  I  frankly  confess  that 
it  has  sometimes  seemed  futile  and  quite  unnecessary  to  try  to 
explain  its  already  clearly  expressed  provisions.  He  will  find 
these  explanations  stated  in  a  narrative-expository  style  that 
is  designed  to  hold  his  interest  and  in  language  more  simple 
than  is  customarily  used  in  the  treatment  of  technical  subjects. 

For  study  use  the  book  will  present  fcAver  difficulties  and  dis- 
tractions than  are  commonly  met  with  when  the  subjects  are 
pursued  by  the  case  method,  or  in  a  book  wholly  designed  for 
men  already  learned  in  the  law. 

iii 


iv  PREFACE 

The  plan  of  the  book,  its  arrangement  and  its  scope  are 
stated  in  the  historical  and  introductory  chapters  at  the  be- 
ginning of  each  of  the  two  main  Divisions  of  the  Uniform 
Negotiable  Instruments  Law,  and  it  will  be  profitable  to  read 
these  before  engaging  upon  the  study  of  the  sections  of  the 
Act  which  follow  them. 

The  Uniform  Negotiable  Instruments  Law  which  forms  the 
main  subject  of  the  book,  is  now  effective  in  all  of  the  States. 
The  book  is  therefore  adaptable  to  all,  such  changes  as  have 
been  made  by  any  of  them  being  shown  by  marginal  refer- 
ences and  given  in  full  in  the  Appendix.  A  merely  synoptical 
treatment  of  the  other  subjects  is  given,  it  is  not  offered  as 
anything  more. 

Charles  F.  Dolle. 

Cincinnati,  April  17,  1920. 


CONTENTS. 

Page 
THE  UNIFORM  NEGOTIABLE  INSTRUMENTS  LAW. 

INTRODUCTORY  AND  HISTORICAL 1 

TITLE  I. 
NEGOTIABLE  INSTRUMENTS  IN  GENERAL. 

SUBDIVISION  I.     FORM  AND  INTERPRETATION 14 

II.     CONSIDERATION 62 

III.  NEGOTIATION    71 

IV.  RIGHTS  OP  THE  HOLDER 93 

V.     LIABILITIES    OF    PARTIES 109 

VI.     PRESENTMENT  FOR  PAYMENT 124 

VIL     NOTICE   OF   DISHONOR 150 

VIII.     DISCHARGE  OF  NEGOTIABLE  INSTRUMENTS    176 

TITLE  II. 
BILLS   OF  EXCHANGE. 

SUBDIVISION  I.     FORM  AND  INTERPRETATION 205 

II.     ACCEPTANCE     212 

III.     PRESENTMENT  FOR  ACCEPTANCE 228 

rV.     PROTEST    239 

V.  ACCEPTANCE  FOR  HONOR 250 

VL  PAYMENT  FOR  HONOR 258 

VIL     BILLS  IN  A  SET 265 

TITLE  III. 
PROMISSORY  NOTES  AND  CHECKS. 

SUBDIVISION  I.     PROMISSORY     NOTES     AND     CHECKS     DE- 
FINED, ETC 270 

TITLE  IV. 

GENERAL   PROVISIONS. 

SUBDIVISION  I.     TITLE  OP  ACT  AND  DEFINITIONS 299 

SYNOPSIS  OP  THE  LAW  GOVERNING  THE  COLLECTION  OF 

CHECKS   AND   OTHER  INSTRUMENTS 300 

QUASI-NEGOTIABLE   INSTRUMENTS    304 

EXPLANATIONS  OF  THE  UNIFORM  BILLS  OP  LADING  ACT. . .   305 
EXPLANATIONS    OF   THE   UNIFORM  WAREHOUSE   RECEIPT 

ACT   318 

DIGEST  OP  THE  LAW  OP  TRANSFER  OP  CERTIFICATES  OF 

STOCK  336 

APPENDIX. 

Wherein  will  be  found  such  changes  in  the  Uniform  Negotiable 

Instruments  Law  as  have  been  made  in  some  of  the  states 365 

INDEX    394 


HISTORICAL 

AND 

INTRODUCTORY. 


If  there  is  one  branch  of  the  law  with  which  the  lawyer 
and  the  business  man  ought  to  make  himself  familiar  it 
is  that  upon  the  subject  of  commercial  paper.  To  know 
all  the  law  is  not  the  province  of  any  man,  not  even  the 
lawyer,  but  every  man  ought  to  be  familiar  with  the  rules 
which  govern  the  use  of  his  business  instruments  and 
the  rights  and  duties  of  the  parties  upon  this  kind  of 
paper.  We  are  all  called  upon  to  si{ni  our  names  to 
promissory  notes,  bills  of  exchange  and  checks,  and 
it  is  very  much  worth  while  to  know  by  what. laws  our 
rights  and  our  duties  in  respect  to  these  are  fixed.  When 
we  know  where  we  stand  in  regard  to  the  negotiable 
instruioents  which  we  sign  and  give  out  or  which  we  re- 
ceive in  the  course  of  our  trade  transactions  we  enjoy  a 
sense  of  security  which  it  is  agreeable  to  feel,  and  this 
Dook  is  intended  to  be  an  aid  to  that  useful  knowledge. 

Every  negotiable  promissory  note,  check,  or  draft, 
which  we  issue  or  indorse  is  really  a  promise  to  perform 
an  obligation  to  the  person  to  whom  we  give  it  and  to  all 
othprs  to  whom  it  may  be  assigned.  Commercial  paper 
is  the  medium  by  which  we  settle  most  of  our  business 
transactions  and  the  fundamental  principles  upon  which 
its  negotiable  character  rests  are  alike  all  over  the  world. 
It  is  by  reason  of  its  negotiability  that  it  has  come  to  be 
so  extensively  used  in  place  of  actual  money  as  the  means 
of  settling  our  business  obligations. 


2  THE  NEGOTIABLE  INSTRUMENTS  LAW 

Meaning  of  Negotiability  means  not  only  that  the 

negotiability.  note,  check,  or  bill  of  exchange  which  we 
issue  may  be  assigned  by  one  person  to  another  by 
delivery  or  indorsement,  but  it  also  means  that  the 
transferee  who  becomes  the  holder  of  the  instrument 
so  transferred  will  take  it  free  from  defenses  avail- 
able to  the  original  and  to  prior  parties  among  them- 
selves, may  sue  upon  it  in  his  own  name,  and  that  his 
rights,  and  the  rights  and  obligations  of  all  parties 
whose  names  are  upon  the  instrument,  will  be  deter- 
mined and  enforced  according  to  the  well  established 
rules  of  the  Law  Merchant.  The  Law  Merchant  is  a 
branch  of  the  Common  Law  comprising  all  those  princi- 
ples and  rulefj  of  mercantile  transactions,  not  alone  con- 
cerning commercial  paper,  but  the  equally  well  estab- 
lished rules  of  Factorage,  Brokerage  and,  in  part,  of  In- 
surance, which  have  been  in  immemorial  use  and  have 
thereby  become  universally  established  and  recognized 
as  binding  custom  and,  by  sanction  of  the  courts,  ob- 
tained the  force  of  law. 

The  unwritten  customs  of  merchants 

Chancellor  j^^^^  ^^^^  defined  by  Chancellor  Kent  in 

Kent  s  definition  -^ 

of  the  law  his  "Commentaries"  on  the  law,  quoting 

merchant.  from  Lord  Mansfield,  as  *'a  system  of  law 

which  does  not  rest  essentially  on  the  positive  institutions 

and  local  customs  of  any  particular  country,  but  consists 

of  certain  principles  of  equity  and  usages  of  trade,  which 

g-eneral  convenience  and  a  common  sense  of  justice  have 

established  to  regulate  the  dealings  of  merchants  and 

mariners  in  all  the  commercial  countries  of  the  civilized 

world." 

Writers  agree  that  the  earliest  history  of  the  customs 

of  merchants  is  obscure.    The  use  of  Bills  of  Exchange, 

^hich  had  their  commercial  origin  in  this  branch  of  the 


HISTORICAL  AND  INTRODUCTORY  3 

law,  and  were  the  lirst  form  of  commercial  paper  to  be 

^  .  .        ,       ,    used,  caunot  be  traced  to  its  beginning, 
Origin  and  early 

history  of  Bills      but  perhaps  bills  are  oi   such  antiquity 
of  Exchange.        ^^.^^  ^j^^^  ^^^j.^  ^j.g^  introduced  by  that 

merchant  said  to  be  mentioned  by  Isocrates  (400  J3.  C.) 
who  came  to  Athens  with  cargoes  of  corn  and  gave 
an  order  upon  a  banker  in  a  town  upon  the  Euxine  with 
whom  he  had  a  credit.  It  is  said  of  Cicero,  tnree  hundred 
years  later,  that  he  paid  the  tuition  of  his  son  at  Athens 
by  an  order  from  a  merchant  in  Rome  drawn  upon  his 
debtor  in  the  Greek  city  and  perhaps  we  may  believe  that 
in  his  time  ^100  B.  C.)  bills  of  exchange,  the  earliest  form 
of  commercial  paper,  first  came  into  use  as  a  means  of 
making  credits  available  for  the  payment  of  the  obliga- 
tions of  merchants  and  traders  residing  in  different  dis- 
tant cities.  It  would  indeed  be  interesting  to  know  their 
very  first  use,  but  however  and  whenever  that  may  have 
been  the  idea  proved  too  good  to  be  lost  and,  accordingly, 
at  the  end  of  the  twelfth  century  they  were  well  estab- 
lished among  the  merchants  of  Italy.  Then,  as  now  and 
always,  convenience  and  safety  in  the  transportation  and 
transfer  of  money  inspired  their  use.  Bills  later  came 
lo  be  used  in  France  nnd  from  thence  were  introduced 
into  England  where  their  earliest  recorded  use,  so  far  as 
may  he  found  in  the  reports  of  early  cases,  is  in  one  de- 
cided in  1603.  They  were  not  at  that  time  employed  in 
England  by  merchants  in  theij-  domestic  transactions, 
but  their  use  seems  to  liave  been  confined  to  foreign 
bills  drawn  by  or  on  foreign  merchants.  Later,  bills 
drav>Ti  by  domestic  merchants  and  finally,  still  later, 
bills  dra-wn  by  or  upon  persons  not  merchants  or  traders 
came  to  be  governed  by  the  already  well  understood  and 
well  established  rules  of  the  customs  of  merchants  upon 
which  all  negotiable  instruments  codes,  and  all  decisions. 


4  THE  NEGOTIABLE  INSTRUMENTS  LAW 

upon  the  subject,  have  since  been  based.  At  an  early 
period  it  was  disputed  in  England  whether  or  not  the 
rules  of  the  law  merchant  applied  to  promissory  notes 
as  well  as  to  bills  of  exchange  but  the  negotiability  of  the 
former  was  afterward,  in  1705,  settled  by  statute.  These 
customs  of  merchants  and  mariners  based,  you  will  ob- 
serve, upon  the  general  convenience  and  a  common  sense 
of  justice,  and  recognized  as  law  more  than  seven  cen- 
turies ago,  have  since  become  the  public  law  of  every 
civilized  country  in  the  world. 

T,    1'   4.     j-«««         The   French  were   the   first  to   syste- 
Earliest  codifica- 
tions of  the  law  matically  arrange  the  rules  of  the  Law 

mere  ant.  Merchant,  in  so  far  as  they  relate  to  com- 

mercial paper  and,  in  the  17th  Century,  codified  them 
in  what  was  kno^\ai  as  ''The  Commercial  Code  of 
France."  This  Code,  it  is  said,  formed  the  basis  of  all 
continental  codes.  Later  they  were  collected  and  codi- 
fied in  Spain,  in  1829,  and  in  Germany  in  1848.  No  gen- 
eral codification  took  place  in  England  until  1882.  In 
the  United  States  there  had  been  no  attempt  to  codify 
the  laws  relating  to  commercial  paper  as  established  by 
usage,  until  1872  when  California  did  so,  in  a  way,  in  its 
** Civil  Code"  adopted  that  year. 

Prior  to  1882,  in  England  and  in  all 
The  need  for  the  United  States,  with  the  exception  of 
England  and  the  California,  the  law  upon  the  subject  of 

United  States        commercial  paper  consisted  in  part  of 

and  the  British 

B.  of  E.  act.  statutory  enactment,  but  more  largely  of 

judicial  decisions  interpreting  the  estab- 
lished customs  of  the  banking  and  business  communities. 
Up  to  that  time  there  had  not  been,  with  the  exception 
referred  to,  any  codification  of  these  decisions  and  es- 
tablished rules  into  written,  enacted  law  in  either  coun- 
try.   Of  course,  in  this  state  of  the  law,  varying  inter- 


HISTORICAL  AND  IxNTRODUCTORY  5 

pretations  of  many  of  the  important  rules  of  the  law 
merchant  confronted  the  lawyer  in  England  and  in  our 
own  country,  more  particularly  in  the  United  States, 
where  there  were  then,  as  now,  about  fifty  courts  of  final 
resort.  Bewildering  complications  and  contradictions 
resulted  from  their  conflicting  decisions  and  the  solu- 
tion of  the  perplexing  problems  which  arose  out  of  con- 
tradictory interpretation  of  this  branch  of  business  law 
involved,  for  the  lawyer,  the  laborious  examination  of 
a  multitude  of  decisions  seldom,  even  then,  providing  a 
clear  and  uniform  rule  for  the  interpretation  of  the 
rights  and  duties  of  parties  to  commercial  paper,  and 
presented  to  the  business  man  justifiable  occasion  for 
dispute  and  litigation. 

In  England  the  need  for  codification  was  met  by  the 
enactment  by  Parliament  in  1882  of  the  "Bills  of  Ex- 
change Act"  and  this  became  the  first  general  codifica- 
tion of  the  laws  relating  to  commercial  paper  in  any  of 
the  English  speaking  countries.  It  was  designed  to 
codify,  as  nearly  as  possible,  all  the  existing  law  upon 
the  subject  in  that  country.  That  Act  is  thoroughly  com- 
prehensive and  covers  the   entire  field  of  commercial 

paper. 

Since  our  system  of  law  is  based  upon 
^ZJ^e^i^r^^'  the  jurisprudence  of  England  it  was,  of 
ments  law.  course,  a  very  logical  consequence  that 

upon  this  important  subject  the  business  community  of 
our  0A\Ti  country  looked  for  guidance  to  the  codification 
of  the  law  merchant  in  Great  Britain  when  the  need 
for  revision  was  proposed  at  the  annual  conference  of  the 
Commissioners  on  Uniform  State  Laws  at  their  meeting 
in  1895.  In  that  year,  in  response  to  this  very  general 
need  and  urgent  demand,  which  had  already  engaged  the 
earnest  attention  of  the  Uniform  Laws  Committee  of  the 


6  THE  NEGOTIABLE  INSTRUMENTS  LAW 

American  Bankers '  Association,  the  annual  conference  of 
the  Commissioners  on  Uniform  State  Laws  appointed  a 
committee  to  draft  an  act  which  would  meet  our  business 
needs.  The  committee  to  which  this  work  was  intrusted 
was  instructed  to  prepare  a  bill  to  be  based  upon  the 
British  Act  which  had  then  been  in  use  for  nearly  four- 
teen years.  This  committee  was  not  limited,  however,  to 
the  consideration  of  that  Act  alone  but  it  was  instructed 
to  prepare  and  present  a  report  which  should  have  re- 
gard also  to  information  to  be  obtained  from  whatever 
other  source  it  might  see  fit  to  consult.  Therefore,  while 
the  British  Act  forms  the  basis  of  our  Uniform  Nego- 
tiable Instruments  Law,  and  while  the  continental  codes 
were  all  consulted  by  its  authors,  the  committee,  never- 
theless, did  not  hesitate  to  depart  from  any  prior  acts 
whenever  they  were  found  to  be  in  conflict  with  the  set- 
tled law  of  this  country. 

There  is  a  marked  difference  in  the  forms  of  the  Brit- 
ish Act  and  our  own,  due  very  probably  to  the  more  com- 
mon use  of  bills  of  exchange  in  England  than  in  the 
United  States.  This  difference,  is,  however,  mainly  in 
the  structure  of  the  law  our  own  Act  being  equally  as 
comprehensive  as  the  British  Act,  and  amply  providing 
for  an  equally  general  use  of  bills  of  exchange  in  our  do- 
mestic and  foreign  commerce,  which  we  shall  presently 
see  when  what  seems  to  be  the  real  business  purpose  of 
our  new  currency  legislation  is  fully  taken  advantage  of 
by  the  banks  and  merchants  of  this  country.  Bills  are 
expected  then  to  exercise  the  same  influence  upon  the 
movement  of  trade  and  the  investment  of  funds  in  this 
country  as  they  now  do  in  the  countries  of  Europe  where 
they  are  so  extensively  employed.  Discounts  will  in  all 
probability  greatly  increase  and  since  it  is  expected  that 
accounts  will  become  available  discount  items  by  means 


HISTORICAL  AND  INTRODUCTORY  7 

of  time  acceptances  in  lieu  of,  or  as  an  addition  to  the 
present  method  of  obtaining  credit  by  promissory  notes, 
which  prevails  in  most  parts  of  this  country,  there  seems 
now  to  be  even  greater  reason  than  ever  before  that  men 
engaged  in  business,  and  those  seeking  a  business  educa- 
tion, shall  make  themselves  familiar  with  the  law  upon  the 
subject  of  commercial  paper  and  that  the  lawyer  shall 
have  a  ready  means  of  reference  to  the  statute  when  his 
aid  is  sought. 

The  committee  to  which  the  work  of  drafting  a  suitable 
act  was  intrusted  prepared  and  submitted  to  the  Com- 
mission at  the  next  Conference  in  Saratoga,  N.  Y.,  held 
there  in  1896,  a  draft  of  what  is  now  known  as  the  Uni- 
form Negotiable  Instruments  Law.    After  some  amend- 
ments had  been  made  by  the  Conference,  most  of  which, 
the  author  of  the  Act  says,  were  such  changes  in  the  ex- 
isting law  as  he  had  not  felt  at  liberty  to  incorporate  in 
his  draft  of  the  proposed  bill,  the  Act  was  agreed  upon 
and  prepared  for  submission  to  the  legislatures  of  all  the 
States  with  the  recommendation  of  the  Conference  for  its 
adoption.     At  this  Conference  representatives  of  four- 
teen States  were  present  and  participated.    Its  commit- 
tee had  the  assistance  of  an  able  expert  upon  the  law  of 
commercial  paper  and  during  the  year  of  its  preparation 
the  draft  of  the  proposed  Act  was  submitted  to  many  of 
the   most   eminent   American   and   English   authorities 
upon  the  subject  for  their  approval  and  criticism.     It 
was  later  submitted  to  the  members  of  tlie  committee  on 
Uniform  Laws  of  the  American  Bankers'  Association 
who,  deeming  the  Act  so  complete  and  satisfactory  and 
so  much  better  than  any  which  it  could  frame,  reported 
it  favorably  and  recommended  to  the  State  Associations 
that  they  present  the  Uniform  Act  to  their  respective 
state  legislatures  and  urge  its  adoption  in  all  the  States. 


8  THE  NEGOTIABLE  INSTRUMENTS  LAW 

States  in  which  it  ^^^  adoption  proceeded  slowly  but  now, 
is  in  effect.  after  twenty-one  years,  the  statute  has 

been  enacted  in  every  State  but  Georgia  and  Texas  and 
in  the  District  of  Columbia,  Hawaii,  Alaska  and  the 
Philippine  Islands,  in  most,  without  change,  and  in  all 
substantially  in  the  form  in  which  it  was  recommended 
by  the  commission.  It  is,  perhaps,  to  be  regretted  the 
legislatures  of  some  have  seen  fit  to  change  any  of  the 
provisions  of  this  Act.  Such  small  ambiguities,  discrep- 
ancies or  obscurities  as  might  appear  in  it  can  better  be 
cleared  away  by  judicial  interpretation,  and  this  seems  to 
have  been  the  conclusion  of  all  subsequent  Conferences 
of  the  commissioners  for,  though  many  amendments  to 
the  Act  have  been  proposed,  none  have  been  adopted  by 
that  body.  However,  in  such  States  as  have  altered  the 
law  in  any  material  respect,  the  changes  will  be  indicated 
in  this  book  by  marginal  notes.  These  will  refer  the 
reader  to  an  Appendix  where  they  will  be  found. 
j^^^  jjg^  The  words  of  the  statute  are  given  con- 

controlling  effect  trolling  effect  wherever  they  are  in  con- 
flict with  the  law  as  it  previously  existed  either  by  stat- 
utory enactment  or  by  judicial  interpretation  of  the  com- 
mon law.  The  Act  was  intended  to  be  a  code  of  all  the 
laws  relating  to  the  use  of  commercial  paper.  Its  style 
and  language  have  been  said  to  be  better,  in  some  re- 
spects, than  the  British  Act.  It  is  also  said  to  be  simpler, 
less  technical  and  more  easily  intelligible  than  that  Act, 
and  it  has  been  commended  by  the  courts  and  by  eminent 
English  authority  because  of  these  qualities. 

The  purpose  of  the  Act  being  to  clear 
purp^s'^roflhe  up. whatever  conflict  existed  in  the  law  of 
act.  negotiable  instruments  in  this  country 

and  to  establish  certainty  and  uniformity  in  their  con- 
struction and  effect  in  all  the  States,  in  order  that  the 


HISTORICAL  AND  INTRODUCTORY  9 

business  man  may  more  readily  understand  his  rights 
and  his  duties  in  regard  to  the  commercial  paper  which 
he  issues  or  accepts  or  to  which  he  otherwise  becomes  a 
party  in  the  course  of  his  business  dealings,  the  Act  will 
be  set  forth  in  this  volume  with  such  explanations  as 
might  be  helpful  to  him.  The  arrangement  of  the  book 
The  arrangement  ^^'^^^  present  each  section  of  the  Act  in  the 
of  the  book.  form  in  which  it  is  in  effect  in  those  States 

where  no  changes  have  been  made,  following  these  with 
the  explanations  which  seem  necessary  to  make  it  intelli- 
gible to  the  man  of  ordinary  comprehension  and  by  ref- 
erences to  related  sections.  Attention  will  be  directed, 
as  has  been  said,  by  marginal  notes,  to  such  States  as 
have  made  changes  in  the  Act  and  what  they  are.  These 
will  be  found  to  be  comparatively  few  and  not  seriously 
to  impair  its  essential  characteristic  of  uniformity. 

Citations  will  be  used  and  these  will  either  illustrate 
the  cases  upon  which  is  based  the  provision  in  the  Act  to 
which  they  refer,  or  they  will  be  of  cases  in  which  it  has 
been  interpreted.  The  courts  of  all  the  States  will,  of 
course,  be  guided  by  the  interpretations  of  other  courts 
of  their  own  States  where  they  have  passed  upon  the  Act, 
but  when  they  have  no  precedent  decision  of  their  own 
they  will  freely  accept,  with  the  same  authority  as  their 
own,  the  decisions  of  the  courts  of  other  States  interpret- 
ing identical  provisions  of  this  Act.  This  fortunate  dis- 
position toward  uniformity  in  interpretation  has  made 
it  possible  for  me  to  use  cases  in  the  citations  which  aptly 
well  illustrate  the  conclusions  stated  in  the  text,  when 
they  are  not  obviously  sustained  by  the  Act  itself,  with- 
out cumbering  the  volume  with  the  multitude  of  cumula- 
tive decisions  that  are  available  and  may  be  found  in  the 
various  digests  of  the  law. 


10  THE  NEGOTIABLE  INSTRUMENTS  LAW 

Although  it  is  applicable  to  all  forms  of  negotiable  in- 
struments, the  Act  has  particular  reference  to  promis- 
sory notes,  bills  of  exchange  and  checks  these  being  the 
principal  forms  of  commercial  paper  and  the  three  with 
which  business  men  most  frequently  meet  in  their  daily 
transactions,  and  perhaps  the  reader  will  be  enabled  to 
approach,  apply  and  better  understand  the  provisions  of 
the  first  title  of  the  Act  if  he  is  here  made  familiar  with 
the  definition  of  each  of  these  instruments  as  it  is  con- 
tained in  the  law.  Accordingly,  a  negotiable  promissory 
note  is  defined  as  follows : 

Definition  of  *  <  A  negotiable  promissory  note  with- 

promissory  note,  j^^  ^g-^  jy^EANiNG  OP  this  act  is  an  uncon- 
ditional promise  in  writing  made  by  one  person  to 
another  signed  by  the  maker  engaging  to  pay  on  de- 
mand, or  at  a  fixed  or  determinable  future  time,  a  sum 
certain  in  money  to  order  or  to  bearer.  Where  a  note 
is  drawn  to  the  maker^'s  own  order,  it  is  not  complete 
until  indorsed  by  him.'' 

Not  all  promissory  notes  are  negotiable,  and  a  written 
promise  to  pay  money  or  other  thing  of  value  may  be  re- 
garded as  a  promissory  note  even  if  it  is  not  negotiable. 
Its  interpretation,  however,  and  the  interpretation  of  the 
rights  and  liabilities  of  its  parties  are  not  governed  by 
this  Act  if  it  is  not  a  negotiable  instrument.  This  sec- 
tion contains  the  definition  of  a  ''negotiable  promissory 
note,"  and,  as  it  will  be  seen  by  reference  to  Sec.  1  of  the 
Act,  the  definition  incorporates  all  of  the  requirements  of 
that  section  in  regard  to  the  form  which  such  an  instru- 
ment must  have  in  order  that  it  may  be  considered  to  be 
a  negotiable  promissory  note. 

The  second  class  of  negotiable  instruments  particu- 
larly embraced  within  the  Act  is  bills  of  exchange,  and 
these  are  defined  as  follows: 


HISTORICAL  AND  INTRODUCTORY  11 

Bill  of  exchange  "A  bill  of  exchange  is  an  uncondi- 
defined.  tional  order  in  writing  addressed  by  one 

PERSON  TO  another,  SIGNED  BY  THE  PERSON  GIVING  IT,  REQUIR- 
ING THE  PERSON  TO  WHOM  IT  IS  ADDRESSED  TO  PAY  ON  DEMAND 
OR  AT  A  FIXED  OR  DETERMINABLE  FUTURE  TIME  A  SUM  CER- 
TAIN IN  MONEY  TO  ORDER  OR  TO  BEARER. ' ' 

A  bill  of  exchange  is  more  commonly  known  as  a 
''draft,"  ''bill,"  "acceptance"  and  "trade  acceptance," 
the  designation  newly  applied  to  bills  drawn  and  accepted 
by  merchants  in  order  to  distinguish  them  from  ' '  Bank- 
ers '  Bills ' '  which  are  at  present  used  only  in  transactions 
growing  out  of  our  foreign  trade.  A  bill  is  usually, 
though  not  necessarily,  drawn  by  one  person  upon  an- 
other with  whom  he  has  a  credit  or  who  is  indebted  to 
him.  It  directs  the  person  upon  whom  it  is  drawn  to  pay 
the  money  due  upon  the  drawer's  credit,  either  immedi- 
ately upon  presentment  of  the  instrument  or  at  a  future 
time,  to  some  other  person  whom  he  names.  Wlien  such 
an  order  is  to  be  issued  certain  requisites  of  form  must 
be  observed.  These  are  fixed  in  this  Act  and  while,  as 
in  other  negotiable  instruments,  the  Act  does  not  desig- 
nate the  exact  lang-uage  to  be  used  in  drawing  a  bill,  the 
substance  of  the  law  must  be  complied  with  and  is  suffi- 
ciently so  in  the  forms  with  which  we  are  all  familiar  and 
can  readily  obtain. 

In  the  introduction  to  the  second  title,  the  provisions 
of  which  are  applicable  to  bills  of  exchange,  I  have  used 
the  occasion  to  outline  the  principal  business  features  of 
the  new  Federal  Reserve  Bank  Act  which  was  designed 
to  permit  and  encourage  the  acceptance  business  by 
national  banks,  and  to  establish  a  rediscount  market  in 
this  country  similar  to  those  of  the  financial  centers  of 
Europe,  based,  to  a  very  large  extent,  upon  bankers '  bills. 

The  third  form  of  familiar  commercial  paper  to  which 
the  law  applies  is  a  check,  and  this  is  defined  in  the  Act 
as  follows: 


12  THE  NEGOTIABLE  INSTRUMENTS  LAW 

A  check  defined.  ' '  A  check  is  a  bill  of  exchange  dkawn 
ox  A  bank  payable  ox  demaxd.  Except  as  hereix  other- 
A^iSE  provided,  the  peovisioxs  of  this  act  applicable  to 

A     BILL     OF     EXCHAXGE     PAYABLE     OX     DEMAXD     APPLY     TO     A 

check/' 

A  check  dra^m  upon  a  bank  is,  therefore,  considered  to 
be  and  is  in  fact  a  bill  of  exchange  payable  upon  de- 
mand. Every  provision  of  this  Act  which  governs  the 
interpretation  and  enforcement  of  the  liabilities  and 
rights  of  parties  to  a  bill  of  exchange  payable  upon  de- 
mand, or  at  sight,  is,  by  this  section,  made  applicable  to  a 
check  unless  by  the  Act  itself  it  is  otherwise  provided. 
All  of  its  provisions  in  regard  to  notice  of  non-paj^ment 
and  in  regard  to  protest,  if  the  check  is  upon  its  face  a 
foreign  bill,  that  is  to  say,  a  bill  drawn  in  one  State  and 
payable  in  another,  must  be  complied  with. 

The  manner  in  which  checks  and  other  instruments  are 
handled  for  collection  and  some  of  the  duties  and  respon- 
sibilities of  banks  and  collecting  agents  will  be  described 
and  explained,  with  reference  to  applicable  sections  of 
the  Act,  at  the  conclusion  of  the  treatment  of  Title  3. 

Certificates  of  deposit  and  bonds  and 
Certificates  of  v  •        4?  n  +•   1.1     • 

deposit  and  their  coupons,  being  fully  negotiable  m- 

^onds.  struments,  being  in  effect,  and  in  fact  but 

promissory  notns,  while  they  are  not  specially  treated  in 
the  Act  or  in  the  explanations,  are  wholly  governed  by  its 
provisions.  At  the  beginning  of  Title  3,  a  short  division 
of  the  Act,  the  provisions  of  which  are  applicable  to  prom- 
issory notes  and  checks,  I  shall  very  briefly  mention 
again  that  their  negotiation  and  interpretation  are  gov- 
erned by  the  Uniform  Negotiable  Instruments  Law  and 
will  state  a  few  of  the  most  important  provisions  of  the 
law  by  which  their  use  is  governed. 

^.  , ,  In  addition  to  the  three  forms  of  com- 

Quasi-negotiable  •        j        j 

instruments.  mercial  paper  mentioned  and  to  certifi- 


HISTORICAL  AND  INTRODUCTORY  13 

cates  of  deposit  and  bonds  and  their  coupons,  which  are 
regulated  wholly  by  the  Law  Merchant,  others,  consid- 
ered as  quasi-negotiable,  that  is,  having  some  of  the 
features  of  negotiable  instruments  and  governed  in  part 
by  the  same  or  similar  laws,  are  bills  of  lading,  ware- 
house receipts  and  certificates  of  stock. 

These  are  made  the  subject  of  other  Uniform  Acts 
proposed  by  the  Commissioners  on  Uniformity  of  State 
Laws  notably  warehouse  receipts,  and  these,  in  forty-one 
States,  the  District  of  Columbia,  Alaska  and  the  Philip- 
pine Islands,  are  now  governed  by  the  Uniform  Act  pre- 
pared and  recommended  by  the  Commissioners  for  their 
interpretation. 

Aside  from  that  Act,  however,  the  other  Uniform  Acts 
have  not  yet  met  \vith  a  generous  approval  from  the  legis- 
latures of  the  States.  The  Bills  of  Lading  Act  has  been 
enacted  in  only  twenty-one  and  the  Uniform  Stock  Trans- 
fer Act  in  only  twelve  States.  The  principles  of  the  laws 
which  they  are  designed  to  partially  codify  are,  how- 
ever, interpreted  to  very  much  the  same  effect  in  nearly 
all.  I  shall,  therefore,  attempt  to  state  these  general 
principles  in  relation  to  each  under  the  title  ''Quasi- 
Negotiable  Instruments." 

Being  impressed,  now,  with  the  real  purpose  of  the 
Act,  namely,  to  make  uniform  the  law  of  negotiable  in- 
strum.ents  in  all  of  the  States,  in  order  that  the  business 
man  may  readily  know  and  understand  what  are,  every- 
where, his  rights  and  his  duties  upon  his  ordinary  com- 
mercial paper,  and  repeating  that  it  was  prepared  and 
enacted  particularly  for  the  benefit  of  men  in  business, 
the  reader  will,  perhaps,  with  this  brief  introduction  and 
explanation  of  its  history,  be  more  interested  and  better 
prepared  to  proceed  with  the  examination  of  the  Act 
itself. 


14  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  1 


TITLE  I. 


NEGOTIABLE  INSTRUMENTS  IN  GENERAL. 
SUBDIVISION     I . 


Form  and  Interpretation. 

Section  Section 

1  Fomi    of    negotiable    instru-  13     AVhen  date  may  be  inserted. 

ments.  14     Blanks;  when  may  be  filled. 

2  Certainty    as    to    sum — what  15     Incomplete     instrument     not 

constitutes.  delivered. 

3  When    promise    is    uncondi-  16     Delivery;      when      effectual; 

tional.  when  presumed. 

4  Detenninable     future     time;  17     Ambiguous  instrument. 

what  constitutes.                      18  Liability    of   persons   signing 

4     Additional   provisions   affect-  in  trade  or  assumed  name. 

ing  negotiability.                      19  Signature  by  agent;   author- 

6  Omissions;    seal;    particular  ity;   how  shown. 

money.  20     Liability   of   persons   signing 

7  AVhen  payable  on  demand.  as  agent,  etc. 

8  When  payable  to  order.  21     Signature     by     procuration; 

9  When  payable  to  bearer.  effect  of. 

10  Terms — when   sufficient.  22     Effect  of  indorsement  of  in- 

11  Date;  presumption  as  to.  fa"t  or  corporation. 

12  Antedated    and   postdated.        23     Forged    signature;    effect   of. 

''Sec.  1.    An-  instrument  to  be  negotiable  ml^st  con- 
form to  the  following  requirements  : 
Form  of  negoti-  1-     It  must  be  in  writing  and  signed 

able  instrument,     by  the  maker  or  drawer  ; 
'^Wisconsin.  2.     Must    contain    an    unconditional 

promise  or  order  to  pay  a  sum  certain  in  money ; 

3.  Must  be  pay'able  on  demand,  or  at  a  fixed  or  de- 
terminable FUTURE  time; 

4.  Must  be  payable  to  order  or  to  bearer;  and, 

5.  Where  the  instrument  is  addressed  to  a  drawee, 

HE  must  be  XAIMED  OR  OTHERWISE  INDICATED  THEREIN  WITH 
reasonable  CERTAINTY. '  '* 

The  opening  section  of  the  law  provides  what  shall  be 
formal  requisites  of  a  negotiable  instrument.  If  any  are 
lacking-,  the  instrument,  although  it  may  be  a  valid  note 


§  1  FORM  AND  INTERPRETATION  15 

or  bill,  is  not  negotiable  and  its  interpretation  and  the 
rights  and  liabilities  of  its  parties  are  not  governed  by 
the  Act.^  Observe  that  the  instrument  must,  first  of  all, 
be  in  writing  and  signed  by  the  person  who  issues  it.  He 
must  either  himself  sign  it  or  his  name  nmst  have  been 
placed  upon  it  by  some  one  whom  he  has  authorized  to 
do  it.  (Sec.  19.)  Writing  includes  print  (Sec.  191)  and 
the  instrument  may  be  written  in  pencil  or  in  ink  and 
the  signature  made  by  mark.-  It  may  be  written  or 
printed  on  material  other  than  paper  or  parchment, 
though  unusual  forms  of  material  ought  to  be  avoided 
as  raising  a  suspicion  of  irregularity. 

By  "maker"  is  meant  the  person  who  makes  and  is- 
sues a  promissory  note.  By  ''drawer"  is  meant  the  per- 
son who  makes  and  issues  bill  of  exchange  or  draft,  or 
a  check  and  it  must,  likewise,  be  signed.  Of  course,  two 
or  more  persons  may  join  in  making  a  promissory  note 
or  drawing  a  bill  or  a  check. 

The  drawer  of  a  check  is  not  the  person  who  presents 
it  at  the  bank  upon  Avhich  it  is  issued  and  draws  the 
money  upon  it,  but  is  the  person  who  signs  and  issues 
it.  The  second  requirement  of  this  section  is  explained 
in  the  next  two  sections  of  the  Act. 

The  instrument  must  be  payable  in  money,  except  in 
those  States  where  by  other  statutes  instruments  pay- 
able in  anything  besides  money  are  declared  to  be  ne- 
gotiable. 

The  third  subsection  of  this  section  is  amplified  in  sec- 
tions 4  and  7  and  sections  8  and  9  define  the  terms 

1.  Windsor  Cement  Co.  vs.  Thompson,  86  Conn.  511. 

2.  Gear\-  vs.  Phvsic,  5  Barn.  &  Cress.  234. 

Brown  vs.  Biitchcrs  &  Drovers  Bank,  6  Hill   (N.  Y.)  443.  41 

Am.  Dec.  755. 
Baker  vs.  Dening,  8  Adol  &  Ellis,  94. 
Reed  vs.  Roark,  14  Tex.  329,  65  Am.  Dec.  127. 
Closson  vs.  Steams,  4  Vt.  11,  23  Am.  Dec.  245. 


16  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  2 

** order"  and  ''bearer."  If  the  instrument  is  neither 
expressly  payable  to  "order"  or  "bearer,"  it  is  not 
negotiable  unless,  without  the  use  of  these  words,  negoti- 
ability may  clearly  be  inferred  from  other  words  em- 
ployed.    (Sec.  10.) 

The  fifth  sub-section  requires  that  the  drawee  of  a 
draft  or  bill  of  exchange,  that  is,  the  person,  firm  or  cor- 
poration upon  whom  it  is  drawn,  must  be  named  or  de- 
scribed with  sufficient  certainty  and  clearness  to  enable 
the  holder  to  know  to  whom  and  where  the  bill  shall  be 
presented.  But  if  the  bill,  at  its  inception,  names  no 
drawee  but  designates  a  place  where  it  is  to  be  presented 
for  payment,  its  acceptance  by  any  one  at  that  place  will 
be  deemed  to  be  an  acknowledgment  that  he  is  the  per- 
son to  whom  it  was  intended  the  bill  should  be  presented 
and  that  he  was  intended  as  the  drawee.^ 

Certainty  as  to  "Sec.   2.     The  sum   payable  is  a  SUM 

sum ;  what  certaiist  within  the  meaning  of  this  act 

constitutes.  although  it  is  to  be  paid  : 

1.  With  interest  ;  or 

2.  By  stated  installments;  or 

^Wyoming,  Idaho,  3.  By  stated  installments,  with  a 
Iowa,  N.  Caro-      provision  that  upon  default  in  payment 

^i^^-  OF  ANY  installment  OR  OF  INTEREST,'^  THE 

^Nebraska  whole  shall  become  due;  or 

N.  Carolina,  4.    With  exchange,  whether  at  a  fixed 

S.  Dakota.  rate  or  at  the  current  rate  ;  or 

5.     With  costs  of  collection  or  ax  attorney's  fee,  in 

CASE  payment  shall  NOT  BE  MADE  AT  MATURITY."^ 

When  an  insti*ument  is  payable  with  interest  the  sum 
payable  is  not  an  uncertain  amount  for  it  can  be  as- 
certained -with  exact  certainty  what  sum  is  payable  up- 
on its  maturity.    The  word  "installments"  used  in  this 

3.  Blackman  vs.  Lehman,  63  Ala.  547. 
Gray  vs.  Milner.  8  Taunt.  739. 
Walton  vs.  Williams,  44  Ala.  347. 

Wheeler  vs.  Webster,  1  E.  D.  Smith  (N.  T.)  1. 


§2  FORM  AND  INTERPRETATION  17 

section  means,  as  in  ordinary'  usage,  partial  payments, 
and  when  a  bill  or  note  is  drawn  or  given  to  become  pay- 
able in  this  manner  the  amount  and  time  when  each  in- 
stallment is  to  be  paid  must  be  named;  therefore,  the 
word  ''stated"  is  used,  meaning,  mentioned  in  or  deter- 
minable from  the  instrument  with  certainty  as  to  both 
time  and  amount. 

A  negotiable  instrument  which  is  payable  in  stated  in- 
stallments,, or  in  which  the  interest  is  payable  at  stated 
periods,  may  contain  the  provision  that  if  any  of  these 
installments  or  if  the  interest  is  not  paid  when  due  the 
whole  amount  of  the  instrument  shall  become  payable  at 
once.*  It  may  also  contain  a  provision  that  the  person 
upon  whom  a  bill  is  drawn  must  in  addition  to  the  amount 
named  in  it  pay  ''exchange"  which  is  the  premium  or 
charge  to  be  collected  by  reason  of  the  difference  in  the 
value  of  the  same  amount  of  money  in  different  countries, 
or  the  disparity  in  the  value  of  the  use  of  the  same 
amount  of  money  in  different  parts  of  the  same  country.'^ 
Such  an  instrument  usually  has  written  or  printed  on 
its  face  the  words  "with  exchange"  and  it  may  fix  a 
definite  rate  or  state  that  the  "exchange"  shall  be  made 
at  the  rate  prevailing  on  the  date  when  it  is  payable  and 
in  that  event  the  words  "at  the  current  rate,"  or  words 
of  similar  import,  are  usually  employed. 

A  promissory  note  or  bill  of  exchange  may  also  con- 
tain a  provision  that  if  it  is  not  paid  when  due  the  person 
obliged  to  pay  it  shall  pay  attorney's  fees  and  other 
costs  of  collection  in  addition  to  the  sum  promised.  Such 
a  provision  is  enforceable  unless,  as  is  the  case  in  some 

4.  Markey  vs.  Casey,  108  Mich.  184. 
Hodsre  vs.  Wallace,  129  Wise.  84. 
Bright  vs.  Offield,  81  Wash.  442. 

5.  riagg  vs.  School  Dist.,  4  N.  D.  30. 

Whittle  vs.  Fond  du  Lac  Natl  Bk.  (Tex.),  26  S.  W.  1106. 


18  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  2 

States,  it  is  made  illegal  either  by  express  statute  or  is 
held  to  be  so  by  the  courts  as. in  conflict  with  the  laws  of 
usury.^  In  that  event,  however,  the  insertion  of  this 
provision  in  the  instrument  does  not  destroy  its  negoti- 
ability.'' If  a  draft  is  presented  to  the  drawee  which 
contains  any  provisions  requiring  him  to  pay  exchange, 
costs  or  fees  of  any  kind,  he  should,  if  he  is  unwilling  to 
pay  them,  refuse  to  accept  it.  If  he  does  accept  it,  he 
will  be  liable  to  pay  a  holder  for  value  strictly  in  ac- 
cordance with  the  terms  of  the  bill,  unless  other  laws  of 
that  State  under  which  such  an  acceptance  is  to  be  en- 
forced negative  any  provision  on  the  instrument  requir- 
ing him  to  do  so. 

When  an  instrument  is  payable  in  installments,  either 
of  principal  or  interest,  and  it  contains  a  provision 
that  upon  default  in  the  payment  of  any  all  shall 
become  due,  and  one  or  more  of  the  installments  is 
past  due  and  unpaid,  one  who  takes  it  afterward  with 
notice  of  the  default  will  not  be  considered  to  be  a  holder 
in  due  course  but  he  will  take  the  instrument  subject  to 
all  the  rights  existing  between  its  original  parties.*  A 
holder  who  takes  the  instrument  after  a  known  or  appar- 
ent default  in  the  payment  of  any  installment  is  charge- 
able with  notice  that  the  party  obliged  to  pay  the  in- 
strument may  have  some  good  defense  available  against 

6.  Miller  vs.  Gardner,  49  la.  235. 
Tyler  vs.  Walker,  101  Tenn.  306. 

7.  Miller  vs.  Kyle,  85  Ohio  St.  186. 

Oppenheimer  vs.  Fanners  &  Merch.  Bk.,  97  Tenn.  19. 
Montgomery  vs.  Crossthwaite,  90  Ala.  553. 
Stapleton  vs.  Louisville  Bankor.  Co.,  95  Ga.  802, 
Dorsey  vs.  Wolff,  142  111.,  589. 
Stoneman  vs.  Pyle,  35  Ind.  103. 

8.  Hodge  vs.  Wallace,  129  Wis.  84. 
Vette  vs.  La  Barge,  64  Mo.  A.  179. 

Natl.  Bk.  of  N.  A.  vs.  Kirby,  108  Mass.  497. 
Waverly  First  Natl.  Bk.  vs.  Forsyth,  67  Minn.  257, 


§  3  FORM  AND  INTERPRETATION  19 

it  in  the  hands  of  the  original  payee,  and  consequently  in 
the  hands  of  any  subsequent  holder  who  takes  it  after 
any  known  or  apparent  default  in  the  payment  of  an 
installment  of  principal  or  interest.'^  If  the  instrument 
does  not  contain  a  provision  making  all  installments  ma- 
ture upon  default  in  the  payment  of  any  one,  or  if  it  is 
provided  that  the  subsequent  installments  shall  mature 
at  the  option  of  the  holder,  what  I  have  just  said  will  not 
apph ',  and  one  taking  such  an  instrument  under  these 
circumstances  will  take  it  in  due  course,  if  he  takes  the 
instrument  before  the  holder  exercises  his  election,^** 
unless  he  is  otherwise  disqualified.  Also  see  Sec.  52. 
Uncertainty  in  the  sum  payable  will  not  be  imputed  when 
there  is  an  obvious  omission  or  the  amount  is  misspelt.^ ^ 
Wlien  promise  is  "Sec.  3.  An  unqualified  order  or 
unconditional.        promise  to  pay  is  unconditional  within 

THE  MEANING  OF  THIS  ACT  THOUGH  COUPLED  WITH  : 

1.  An  INDICATION  OF  A  PARTICULAR  FUND  OUT  OF  WHICH 

reimbursement  is  to  be  made,  or  a  particular  account 
to  be  debited  with  the  amount;  or 

2.  a  statement  of  the  transaction  which  gives  rise 
to  the  instrument. 

But  an  order  or  promise  to  pay  out  of  particular 

FUND  is   not  unconditional.^^ 

This  section  means  that  a  promise  or  an  order  to  pay, 
otherwise  unqualified,  meets  the  requirement  of  sub- 
section 2  of  section  1  and  is  to  be  considered  uncondi- 
tional, although  the  instrument  contains  a  reference  to  a 
particular  fund  out  of  which  the  person  who  is  to  pay  it 
shall  reimburse  himself.^-    It  is  also  unconditional  if  it 


9.  McCorkle  vs.  Miller,  64  Mo.  A.  153,  156. 
Vette  vp.  La  Barge,  64  Mo.  A.  179. 

10.  Battle  Creek  Nat.  Bk.  vs.  Dean.  86  Iowa.  656,  53  N.  W.  338. 
Morgan  vs.  U.  S.,  113  U.  S.  476. 

11.  McCov  vs.  Gilmore,  7  Ohio,  268. 
Beardslev  vs.  Hill,  61  111.  354. 
Ohm  vs.  Yung,  63  Ind.  432. 

12.  Schmittler  vs.  Simon,  101  N.  Y.  554. 


20  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  3 

directs  the  payment  to  be  charged  to  a  particular  ac- 
count. If  it  contains  a  ' '  statement, ' '  meaning  an  indica- 
tion or  description  of  the  nature  of  the  transaction  which 
gives  rise  to,  that  is,  causes  the  instrument  to  be  made 
and  issued,  it  is  not  to  be  considered  a  conditional  prom- 
ise or  order  and  its  negotiability  is  not  affected  by  such 
a  statement.'^  But  if  the  instrument  is  so  drawn  that 
it  directs  or  promises  the  payment  to  be  made  out  of 
a  particular  fund,  it  is  not  unconditional  and  therefore 
not  a  negotiable  instrument,  for  its  payment  then  de- 
pends upon  the  sufficiency  of  the  particular  fimd  out  of 
which  it  is  to  be  paid.  Municipal  warrants  which  are  so 
draAvn,  and  all  usually  are,  are  therefore  not  negoti- 
able.^* An  order  or  promissory  note  drawn  to  be  so  pay- 
able would  not  be  governed  by  the  provisions  of  this  Act 
and  the  rights  and  liabilities  of  parties  to  such  an  in- 
strument would  not  be  the  same  as  upon  a  negotiable  bill 
or  note. 

Negotiability,  however,  is  not  essential  to  the  validity 
of  a  bill  or  note,^-^  and  while  an  instrument  which  is  non- 
negotiable  may  be  transferred  from  one  person  to  an- 
other by  indorsement  and  delivery^®  it  is,  in  the  hands  of 
any  holder,  subject  to  all  of  the  defenses  which  the  maker 
or  other  primary  party  could  interpose  to  prevent  its 
pa^Tnent  if  still  in  the  hands  of  the  original  payee. ^'^  The 
assignee  of  such  an  instrument  takes  no  greater  right  or 
title  than  that  of  his  predecessor.     This  is  not  true  of 

13.  Schmidt  vs.  Pegg,  172  Mich.  159. 

14.  Read  vs.  Buffalo,  67  Barb.  (N.  Y.)  526. 

Beverqne  vs.  San  Francisco,  1  Me  All  (U.  S.)  175,  2  Fed.  Cas. 
No.  1137. 

15.  Roads  vs.  Webb,  91  Me.  406,  nt  410,  41  Atl.  128. 

16.  Richards  vs.  Warring,  39  Barb  (N.  Y.)  42. 

17.  Warren  vs.  Scott,  32  Iowa.  22. 
Ravmond  vs.  Middleton,  29  Pa.  St.  529. 
Roads  vs.  Webb,  91  Maine,  406,  at  411. 


§  4  FORM  AND  INTERPRETATION  21 

negotiable  instruments  and  forms  their  principal  distin- 
guishing feature. 

Determinable  "Sec.   4.      An   instrument  is   payable 

future  time;  -'^'^  ^  determinable  future  time,  within 

what  constitutes,  the  meaning  of  this  .\ct,  which  is  ex- 
"Wisconsin.  pressed  to  be  payable 

1.  At  a  fixed  period  after  date  or  sight  ;  or 

2.  On  or  before  a  fixed  or  determinable  future  time 
specified  therein;  or 

3.  On  or  at  a  fixed  period  after  the  occurrence  op 

A  SPECIFIED  event,  WHICH  IS  CERTAIN   TO  HAPPEN,  THOUGH 
THE  TIME  OF  HAPPENING  IS  UNCERTAIN. 

"An  INSTRUMENT  PAYABLE  UPON  A  CONTINGENCY  IS  NOT 
NEGOTIABLE,  AND  THE  HAPPENING  OF  THE  EVENT  DOES  NOT 
CURE  THE  DEFECT." 

The  first  sub-section  of  this  section  embraces  a  note 
or  bill  payable  a  certain  number  of  days,  months,  or 
years  after  date  or  after  sight. 

The  second  embraces  such  as  are  payable  on  or  before 
a  fixed  date,  and  in  this  would  be  included  such  as  may 
be  payable  '*on  or  by"  a  fixed  time,  the  w^ord  *'by"  be- 
ing regarded  as  the  equivalent  of  **  before.  "^^  It  also 
embraces  one  payable  on  or  before  a  determinable  fu- 
ture time  which  can  be  known  and  determined  from  the 
language  used  in  the  instrument  itself. 

The  third  embraces  such  as  are  payable  at  a  fixed  per- 
iod (number  of  days,  months  or  years,  o?i  demand,  or  at 
a  fixed  date)  after  the  happening  of  a  named  event  which 
must  be  certain  to  happen  although  the  time  when  it  vdW 
happen  may  be  uncertain.  The  most  common  illustra- 
tion of  an  instrument  payable  after  the  happening  of  an 
event  certain  to  happen  is  of  one  payable  after  the 
death  of  a  person  whom  it  names  but,  of  course,  such 
certainty  as  this  is  not  always  required.  A  certificate 
of  deposit,  for  example,  may  be  made  payable  ''upon  re- 

18.     Preston  vs.  Dunham,  52  Ala.  217. 
Massie  vs.  Bolford,  68  111.  290. 


22  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  5 

turn  of  this  certificate ' '  and  this  has  been  held  to  be  suffi- 
ciently certain  to  meet  this  requirement  and  not  impair 
its  negotiability,  these  words  being  the  equivalent  of  a 
promise  to  pay  ''on  demand. "^^     (See  Sec.  17.) 

This  section  also  provides  that  an  instrument  pay- 
able upon  a  contingency,  that  is,  an  uncertainty,  is  not 
negotiable,  and  even  though  the  uncertainty  upon  which 
it  depends  does  happen,  it  does  not  thereby  become 
negotiable.  This  so  distinctly  states  the  rule  that  no 
further  explanation  seems  necessary.^"  Examples  are 
to  be  found  in  the  cases  cited. 

* '  Sec.  5.    An  instkument  which  contains  an  order  or 

PROMISE  to  do  any  ACT  IN  ADDITION  TO  THE  PAYMENT  OF 
MONEY  IS  NOT  NEGOTIABLE."      BuT  THE  NEGOTIABLE  CHARAC- 

Additional  "^^^  ^^  -^^"  instrument  otherwise  negoti- 

provisions  not       able    is    not    affected    by    a    provision 

affecting  nego-      which — 

tiability.  ^     Authorizes  the  S4LE  of  collateral 

^Illinois. 

securities   in    case   the   instrument   be 

^N.  Carolina.         not  paid  at  maturity;  or 

^Kentucky.  £.     ^Authorizes  a  confession  of  judg- 

<^Wisconsin.  „  _ 

ment"  if  the  instrument  be  not  paid  at 

maturity;  or 

3.  'Waives  the  benefit  of  any  law  intended  for  the 
advantage  or  protection  of  the  obligor;  or 

4.  Gives  the  holder  an  election  to  require  some- 
thing to  be  done  in  lieu  of  payment  of  money. 

But  nothing  in  this  section  shall  validate  any  pro- 
vision or  stipulation  otherwise  illegal.'"^ 

The  first  paragraph  of  this  section  is  readily  under- 
stood and,  except  as  it  may  be  otherwise  provided  in  the 
Act,  an  instrument  which  requires  the  maker  or  acceptor 
to  perform  some  act  in  addition  to  the  payment  of  money 
cannot  be  negotiated  in  the  sense  in  which  that  term  is 
used  in  the  Act.    Such  an  instrument  would  have  merely 

19.  Citizens  Bank  vs.  Brown,  45  0.  S.  39. 
Miller  vs.  Austin,  13  How.   (U.  S.)   218. 

20.  Hibemia  Bk.  &  Tr.  Co.  vs.  Dresser,  132  La.  532. 
Tisdale  Lbr.  Co.  vs.  Piquet.  153  App.  Div.  (N.  Y.)  266. 


§  5  FORM  AND  INTERPRETATION  23 

the  force  and  legal  effect  of  a  simple  contract,  would  be 
interpreted  under  the  rules  of  law  which  apply  to  simple 
contractual  relations,  and  would  be  assignable  as 
such.^^  There  are,  however,  four  exceptions  given  to 
this  rule  which  are  declared  not  to  affect  the  negoti- 
ability of  the  instrument  and  either  or  all  of  these  may 
appear  in  it  without  destroying  its  negotiable  character. 

The  first  is  usually  found  in  that  form  of  promissory 
note  used  when  a  loan  is  made  upon  collateral,  such  as 
stocks,  bonds,  etc.,  which  are  pledged  to  secure  it.  In 
such  an  instrument  the  holder  is  given  pov/er  to  sell  the 
security  pledged.  The  negotiability  of  such  an  instru- 
ment will  not  be  impaired  by  a  provision  requiring  addi- 
tional collateral  or  authorizing  the  surrender  of  the 
whole  or  part  of  the  pledge  upon  the  complete  or  partial 
performance  of  the  promise,^-  but  a  provision  in  a  mort- 
gage note  accellerating  its  maturity  if  the  mortgagor 
shall  do  anything  to  impair  the  security  of  the  pledge 
will  destroy  its  negotiability.-^ 

The  second  is  of  instruments  Avhich  authorize  some 
one  to  admit  the  maker's  indebtedness  and  confess  judg- 
ment upon  the  obligation  if  it  is  not  paid  at  maturity. 
The  instrument  may  not,  however,  contain  a  provision 
authorizing  the  confession  of  judgment  before  maturity 
for  such  a  provision  would  destroy  its  negotiability.^-* 
A  promissory  note  of  this  kind  usually  contains  a  waiver 
of  notice  and  of  other  benefits  which  the  maker  would 
otherwise  be  entitled  to  enjoy  and  the  third  sub-section 

21.  Reed  vs.  Murphy,  1  Ga.  236. 

22.  Kennedy  vs.  Broderiok,  216  Fed.  137.  166  C.  C.  A.  381. 
Finlev  vs.  Smith,  16.5  Kv.  445. 

Il?ley  vs.  Smedes,  15  Dalv  (N.  Y.)  488,  8  N.  Y.  Suppl.  470, 

29  N.  Y.  St.  417. 
Gross  vs.  Emerson,  23  N.  H.  38. 

23.  Bright  vs.  Offield,  81  Wash.  442. 

24.  Wis.  Yearlv  Meetff.  of  F.  Baptists  vs.  Babler,  115  Wise.  289. 
First  Nat'l"  Bank,  Elgin,  vs.  Rasscll,  124  Tenn.  618. 


24  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  5 

provides  that  this  waiver,  as  well  as  a  waiver  of  any 
of  his  other  rights  and  benefits  by  the  person  obliged  to 
pay  the  instrument,  secured  to  him  by  laws  intended  for 
his  protection,  may  be  contained  in  the  instrument  and, 
notwithstanding  this  provision,  the  instrument  will  con- 
tinue to  be  negotiable.^^ 

The  fourth  means,  as  it  says,  that  the  instrument  may 
be  payable  in  money  and  provide  as  well  that  the  holder, 
who  is  the  person  lawfully  having  it  in  his  possession, 
may  have  the  election,  that  is,  the  choice,  of  requiring 
the  person  obliged  to  pay  it  to  make  payment  in  money 
or,  in  the  alternative,  to  perform  some  act  instead,  as, 
for  example,  in  lieu  thereof  to  deliver  certain  property 
or  securities,  or  perform  certain  services,  which  must  be 
set  forth  in  the  instrument. ^^  But,  observe,  that  if  the 
instrument  itself  contains  a  direction  to  the  person 
obliged  to  pay  it  or  contains  his  promise  to  do  any  act  in 
addition  to  the  pajniient  of  money,  it  is  not  negotiable. 
Another  section  of  the  Act  (Sec.  132)  provides  that  the 
acceptance  of  a  bill  of  exchange  may  not  express  that  the 
drawee  will  perform  his  promise  by  any  other  means 
than  the  payment  of  money.  Yet,  the  negotiability  of 
the  instrument  would  not  be  affected  by  an  acceptance 
which  agrees  to  pay  the  instrument  in  money  but  pro- 
vides also  that  the  holder  may,  at  his  election,  require 
something  to  be  done  instead. 

If,  however,  the  instrument  contains  any  illegal  pro- 
vision, or  stipulation,  such  a  provision  or  stipulation  is 
not  made  lawful  by  this  section.  There  are  in  all  States 
laws  which  define  what  are  illegal  acts  and  this  section 
is  not  intended  to  make  legal  any  which  would  otherwise 
be  unlawful.    What  are  unlawful  provisions  differ  in  the 

25.  Hughitt  vs.  Johnson,  28  Fed.  865. 

26.  Hostetter  vs.  ^^ilson,  36  Barb.   (N.  Y.)   307. 


§  6  FORM  AND  INTERPRETATION  25 

several  States  and  to  know  them  the  statutes  of  each 
State  must  be  examined.  Very  generally  stated  they 
are  such  as  violate  positive  law,  the  laws  of  religion  or 
morality  or  such  as  are  distinctly  opposed  to  public 
policy. 

Omissions;  seal;  ''Sec.  6.     The  validity  and  negotiable 

particular  character  of  an  instrument  are  not  af- 

money.  fected  by  the  fact  that^ — 

"Illinois.  "1^^     j^  jg  -^Q^  dated;  or 

2.  Does  not  specify  the  value  given,  or  that  any 
value  has  been  given  therefor;  or 

3.  Does  not  specify  the  place  where  it  is  drawn  or 
the  place  where  it  is  payable  ;  or 

4.  Bears  a  seal;  or 

5.  "Designates  a  particular  kind  of  current  money 
in  which  payment  is  to  be  made. 

But  NOTHING  IN  THIS  SECTION  SHALL  ALTER  OR  REPEAL 
ANY  STATUTE  REQUIRING  IN  CERTAIN  CASES  THE  NATURE  OF 
THE  CONSIDERATION   TO  BE  STATED  IN  THE  INSTBUMENT. '' 

The  negotiable  character  of  an  instrument,  otherwise 
negotiable,  is  not  destroyed  nor  is  its  negotiabilitj^  af- 
fected by  the  fact  that  it  is  not  dated  or  that  the  words 
"value"  or  "value  received"  are  omitted  or  it  does  not 
specify  what  value  was  given  for  it.  Nor  is  a  note  or  a 
bill  bearing  a  seal  thereby  rendered  the  less  negotiable. 
An  investment  bond  of  a  municipal  or  other  corporation 
bearing  a  seal  is  negotiable,  as  are  its  interest  coupons. 
(See  Sec.  184.) 

The  instrument  is  negotiable  if  it  does  not  appear  to 
have  been  drawn  or  made  payable  at  any  specified  place. 
Such  an  instrument  is  deemed  to  have  been  drawn  at 
the  place  where  it  is  issued  and  if  no  place  of  payment  is 
named,  it  is  payable  at  the  given  address  of  the  person 
who  is  to  pay  it;  and  if  this  has  also  l)een  omitted  then 
at  his  residence  or  place  of  business.     (Sec.  73.) 

A  promissory  note,  bill  of  exchange,  or  other  nego- 
tiable instrument  may  designate  payment  to  be  made 


26  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  7 

in  a  particular  kind  of  money  in  common  and  general 
use  at  the  place  where  it  is  payable,  and  receivable  and 
passing  by  law  as  money,  without  destroying  or  affecting 
its  negotiability.^'^  In  some  of  the  States  there  are  laws 
requiring  that  in  certain  cases  the  nature  of  the  consid- 
eration must  be  expressed  in  the  instrument,  as,  in  cer- 
tain States,  that  a  note  given  for  some  kinds  of  cropping 
seeds  must  so  state,  and  this  section  is  not  intended  to 
alter  or  rejDeal  such  laws.  Therefore  it  is  provided  gen- 
erally that  if  the  nature  of  the  consideration  upon  which 
it  is  based  is  expressed  in  the  instrument  its  negotiability 
is  not  affected  by  such  a  provision. 

When  payable  ' '  Sec.  7.    An  instrument  is  payable  on 

on  demand.  demand— 

1.  Where  it  is  expressed  to  be  payable  on  demand,  or 
at  sight,  or  on  presentation  ;  or 

2.  In  which  no  time  for  payment  is  expressed. 
Where  an  instrument  is  issued,  accepted,  or  indorsed 

when  overdue,  it  is,  as  regards  the  person  so  issuing, 
accepting  or  indorsing  it,  payable  on  demand. '^ 

A  promissory  note  Avhich  by  its  terms  is  payable  upon 
demand,  or  a  draft  or  bill  of  exchange  payable  at  sight 
or  upon  presentation,  or  a  note  or  other  negotiable  in- 
strument in  which  no  time  for  payment  is  fixed,  must  be 
paid  by  the  person  who  is  obliged  to  pay  it,  whenever 
the  holder  presents  it  to  him  and  demands  its  payment. 
And  it  is  so  payable  even  if  it  is  payable  with  interest 
and  contains  a  provision  that  the  interest  shall  be  pay- 
able annually  or  at  other  fixed  periods  after  its  date.^^ 
Such  a  provision  is  not  regarded  as  an  indication  that 
the  holder  is  not  expected  to  present  the  instrument 
for  payment  until  the  time  at  which  the  interest  is  payable 

27.  Hatch  vs.  First  Nat'l  Bank,  94  Me.  348,  SO  Am.  St.  Rep.  401. 

28.  Header  vs.  Dollar  Savg.  Bk.,  56  Ga.  605. 
Converse  vs.  Johnson,  146  Mass.  20,  14  N.  E.  925. 
Shaw  vs.  Shaw,  43  N.  H.  170. 

Knight  vs.  Braswell,  70  N.  C.  709. 


§  7  FORM  AND  INTERPRETATION  27 

and  not  at  all  to  be  understood  to  require  liim  to  with- 
hold demand  until  that  time. 

An  instrument  which  is  issued,  accepted,  or  which  is 
transferred  from  one  person  to  another  by  indorsement 
after  it  is  past  due,  is,  as  to  the  person  so  issuing,  accept- 
ing or  indorsing  it  and,  of  course,  as  to  all  prior  parties, 
payable  at  once.  In  order  to  hold  the  indorser  indorsing 
such  an  instrument  after  maturity  the  holder  must  pre- 
sent it  for  payment  within  a  reasonable  time  after  its 
negotiation  to  him,  although  it  has  previously  been  dis- 
honored, and  if  it  is  not  then  paid  must  give  notice  of 
dishonor  to  his  transferers^  if  his  liability  had  not 
already  been  fixed  by  notice  upon  its  previous  dishonor.^^* 

The  holder  of  an  instrument  payable  on  demand  has 
the  right  to  demand  payment  immediately  after  its  issue 
or  negotiation  to  him.^*^  He  may,  if  he  desires,  wait  a 
reasonable  time  before  doing  so,  but  what  is  a  reasonable 
time  is  a  question  w^hich  will  permit  of  varying  con- 
struction (see  sees.  53,  71,  144  &  193)  and  it  is  proper, 
if  the  instrument  bears  indorsements,  to  make  demand 
at  once  unless  a  delay  has  been  agreed  upon,  and  then 
proceed  as  required  under  Sees.  89  to  118  inclusive.  Of 
course,  it  is  unusual  to  do  this  when  the  instrument  is 
a  promissory  note  but  not  at  all  unusual  in  this  country 
in  the  case  of  bills  of  exchange  payable  on  demand.  In- 
deed, when  the  instrument  is  a  check,  its  detention  for  a 
very  few  days  without  presenting  it  for  payment  has 
been  held  to  be  an  unreasonable  delay.^^     It  is  not  rec- 

29.  Smith  vs.  Caro  &  Baum,  9  Oregon,  278. 
Colt  vs.  Barnard,  18  Pick.  260. 
Libbey  vs.  Pierce,  47  N.  H.  309,  314. 
Beer  vs.  Clifton,  98  Cal.  323. 

29a.  Libbey  vs.  Pierce,  47  N.  H.  309,  314. 

30.  Merritt  vs.  Todd,  23  N.  Y.  28. 

31.  Nat'l  State  Bk.  vs.  Weil,  141  Pa.  St.  457;  21  A.  667. 


28  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  8 

ommended,  however,  that  immediate  demand  be  made 
for  the  payment  of  a  bill  or  note  which  has  been  issued 
or  drawn  to  be  used  as  a  credit  instrument.^^ 

After  demand  and  notice  to  the  indorsers,  the  holder 
may  sue  upon  the  instrument  at  his  pleasure  and  he  is 
limited  as  to  the  length  of  time  he  may  wait  before  doing 
so  only  by  the  statute  of  limitations  governing  such 
instruments  in  the  State  in  which  they  are  to  be  enforced. 
More  will  be  said  upon  this  subject  under  the  sections 
above  referred  to.  The  maker  of  a  demand  note  has,  of 
course,  the  right  to  pay  it  at  any  time  after  its  issue 
unless  a  delay  has  been  agreed  upon.^^ 
When  payable  to      ''Sec.  8.     The  instrument  is  payable 

PJ,*??^-  .  TO    ORDER    where    IT    IS    DRAWN    PAYABLE    TO 

"Illinois. 

THE  ORDER  OF  A  SPECIFIED  PERSON  OR  TO  HIM 
OR  TO  HIS  ORDER.  It  MAY  BE  DRAWN  PAYABLE  TO  THE  ORDER 
OF 

1.  a  payee  who  is  not  maker,  drawer,  or  drawee;  or 

2.  The  drawer  or  maker  ;  or 

3.  The  drawee;  or 

4.  Two  or  more  PAYEES  JOINTLY;   OR 

5.  One  or  some  of  several  payees  ;  or 

6.  The  holder  of  an  office  for  the  time  being." 
Where  the  instrument  is  payable  to  order  the  payee 

must  be  named  or  otherwise  indicated  therein  with 
reasonable  certainty,'' 

An  instrument  payable  to  order  requires  indorsement 
to  pass  the  title  or  ownership.  To  be  payable  to  order 
the  payee  must  either  be  named  in  it  or  described  suffi- 
ciently so  that  his  identity  can  be  easily  ascertained,^* 
(Sec.  1)  and  the  instrument  must  state  that  it  is  pay- 
able to  the  order  of  the  person  named  or  described  as 
the  payee.    If  these  words  are  not  used  and  negotiability 

32.  Columbian  Banking-  Co.  vs.  Bowen,  134  Wise.  218. 
Nutting  vs.  Burked,  48  Mich.  241,  12  N.  W.  184. 

33.  Stover  vs.  Hamilton,  21  Gratt  (Va.)  273. 

34.  United  States  vs.  White,  2  Hill,  59. 
Blackman  vs.  Lehman,  63  Ala.  547. 


§  8  FORM  AND  INTERPRETATION  29 

cannot  clearly  be  inferred  from  other  language  employed 
in  the  instrument  it  will  not  be  negotiable.^'' 

It  is  payable  to  order  and  must  be  transferred  by 
indorsement,  when  it  is  payable  to  one's  own  self  or  order 
or,  if  a  bill  of  exchange,  when  it  is  payable  to  the  person 
upon  whom  it  is  drawn  or  to  his  order.  It  is  also  pay- 
able to  order  if  it  is  payable  to  the  order  of  a  person 
who  is  not  the  maker,  drawer  or  drawee.  That  person 
is  then  called  the  ''payee."  The  instrument  may  be 
made  or  drawn  payable  to  several  persons  jointly,  or 
a  person  and  a  corporation  jointly,  a  corporation  being, 
by  a  fiction  of  the  law,  an  artificial  person  having  a  dis- 
tinct existence  as  such.  It  may  also  be  made  or  drawn 
payable  in  the  alternative  to  one  or  more  of  several  per- 
sons whose  names  may  be  mentioned  or  who  may  be 
described  in  the  instrument. 

The  holder  of  an  office  need  not  be  designated  by 
name.36  An  instrument  payable  to  the  holder  of  an  office 
whose  name  it  does  not  mention  may  be  presented  for 
payment  when  due  by  or  to  whatever  person  holds  the 
office  designated,  and  such  a  presentment  is  good  and  the 
instrument  may  be  negotiated  by  the  indorsement  of  the 
person  holding  the  office  named.  (See  Sec.  42.)  The  de- 
scription of  the  officer,  as  for  example,  "Pay  the  Treas- 
urer of  Blank  Company,"  would  designate  the  payee  with 
the  certainty  required  by  Section  1,  Sub-section  5.  So  also 
is  a  payment  made  to  the  holder  of  the  office  designated 
in  the  instrument  or  indorsement  as  the  payee  good,  even 
if  it  is  not  made  at  the  office  named.  And  if  a  person 
is  named  and  described  as  the  holder  of  an  office  and  he 
has  relinquished  his  office,  presentment  or  payment  to, 
or  suit  to  enforce  the  instrument  by  his  successor   is 

35.  Putnam  vs.  Cryines,  1  McMul.  (S.  C.)  9,  36  Am.  Dec.  250. 

36,  McBroom  vs.  Treas.  Lebanon  Co.,  31  Ind.  268 


30  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  8 

proper,^"  unless  the  instrument  is  his  own  property  and 
the  designation  of  the  office  he  holds  is  used  only  for 
description.  However,  care  must  be  exercised  to  see 
that  the  proper  person  accepts  the  instrument  or  that 
pajTiient  is  made  to  the  proper  person  when  the  drawee 
or  payee  is  the  holder  of  an  office  and  is  not  mentioned 
by  name,  or  if  he  is  mentioned  by  name  together  with 
a  description  of  the  office  he  holds,  and  payment  should 
never  be  made  unless  the  instrument  is  at  once  surren- 
dered. (Sees.  88,  119.)  Even  if  the  instrument  is  surren- 
dered, payment  to  the  wrong  person  will  not  always  dis- 
charge the  obligation.  Exceeding  great  care  must  be 
exercised  when  there  is  any  uncertainty  in  this  regard. 
Reasonable  certainty  in  describing  the  drawee  or  payee  is 
required  if  he  is  not  designated  by  name  for  the  reason, 
as  has  already  been  stated,  that  it  must  appear  to  whom 
and  Avhere  the  instrument  is  to  be  presented,  and  in  order 
that  it  shall  indicate  clearly  by  whose  indorsement  it  may 
be  negotiated  and  to  whom  payment  is  to  be  made.  (Sec. 
1.)  It  has  been  held  that  an  instrument  payable  to  a 
'* Trustee"  is  not  commercial  paper  and  there  are  diffi- 
culties in  the  way  of  the  transfer  of  such  paper  by  in- 
dorsement which  very  well  deserve  careful  inquiry.^^ 
(See  Sec.  42.) 

If  an  instrument  is  payable  to  a  named  person  but  not 
to  his  order,  and  if  it  is  not  payable  to  bearer  as  is  pro- 
vided in  the  next  section,  it  is  not  negotiable,  unless  from 
the  use  of  other  words  negotiability  is  clearly  to  be  in- 
ferred. But  an  instrument  which  is  negotiable  at  its 
origin  continues  to  be  so  until  it  has  been  restrictively 

37.  McDonald  vs.  McLaudilin,  74  Me.  480. 
Tainter  vs.  Winter,  53  Me.  348. 
Davis  vs.  Gore,  6  N.  Y.  124. 

38.  National  Citv  Bk.  vs.  Bankers  Trust  Co.,  37  App.  (D.  C),  533. 
Third  Nat  '1  Bk.  vs.  Lana:e,  51  Md.  138,  34  Am.  R.  304. 
Sturtevant  vs.  Jacques,  14  Allen  (Mass.)  523. 


§  9  FORM  AND  INTERPRETATION  31 

indorsed  or  is  discharged  by  payment  (sec.  47)  and  if, 
during  its  negotiation,  the  instrument  obtains  an  in- 
dorsement from  which  words  are  absent  wliich  imply  the 
power  to  further  negotiate  it,  that  is,  which  merely  omits 
such  words,  it  continues  to  be  negotiable  notwithstand- 
ing their  omission.    (Sec.  36.) 

When  payable  ''Sec.  9.     The  instrument  is  payable 

to  bearer.  r^^  bearer 

"Illinois.  I      When  it  is  expressed  to  be  so  pay- 

able; OR 

2.  AVhen  it  is  payable  to  a  person  named  therein  or 
bearer;  or 

3.  "^When  it  is  payable  to  the  order  of  a  fictitious 
OR  non-existing  person,  and  such  fact  was  known  to 
the  person  making  it  so  payable;  or 

4.  When  the  name  of  the  payee  does  not  purport 

TO   BE   the   name   OF   ANY   PERSON;   OR 

5.  "When  the  only  or  last  indorsement  is  an  in- 
dorsement IN  blank." 

An  instrument  is  payable  to  and  negotiable  by  the 
person  who  has  it  in  his  possession  when  it  is  written 
*'pay  to  bearer,"  these  w^ords  meaning  that  the  person 
who  has  the  instrument  in  his  possession  and  presents 
it  for  payment,  is  the  proper  person  to  receive  the  money 
due  upon  it.  (Sec.  51. )•  Words  of  similar  import  may 
be  employed.  Payment  to  the  bearer  at  the  maturity  of 
the  instrument  is  good  even  though  the  person  receiv- 
ing payment  does  so  without  authority  of  the  owner  of 
the  instrument,  provided  the  person  paying  had  at  the 
time  of  payment  no  knowledge,  or  was  not  charged  with 
any  duty  to  know  that  the  holder  acted  fraudulently  in 
presenting  the  instrument  and  receiving  the  payment. 
(Sec.  88.)  An  instrument  which  is  made  payable  to  a 
named  person  whose  name  is  followed  by  the  words  *'or 
bearer"  is  payable  to  any  one  who  has  it  in  his  posses- 
sion and  can  be  negotiated  by  him  even  if  it  does  not 
bear  the  indorsement  of  the  payee  whose  name  appears 


32  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  9 

upon  its  face  as  the  person  to  whom  it  is  payable,  for 
the  obvious  reason  that  such  an  instrument  is  to  be  paid 
either  to  the  person  named  or  to  anybody  else  who 
bears  it. 

When  an  instrument  is  payable  to  a  fictitious  person, 
that  is,  one  who  is  not  real,  but  a  pretended  person,  or  if 
real,  one  who  has  no  interest  in  the  instrument  and 
whose  name  is  used  merely  for  the  purpose  of  decep- 
tion,^^^  and  the  person  making  the  instrument  knows  at 
the  time  of  issuing  it  that  the  payee  is  fictitious,  it  is 

payable  to  bearer.  The  obvious  intention  of  this  sub- 
section is  that  such  an  instrument  shall  not  require  in- 
dorsement since  no  person  capable  of  or  interested  in  in- 
dorsing it  exists.  Quite  obviously  also,  an  instrument 
payable  to  the  assumed,  trade  name  under  which  one  may 
be  doing  business  would  not  become  payable  to  bearer 
because  the  instrument  was  not  made  payable  to  the  fic- 
titious name  for  the  purpose  of  deception.^^  (See  Sec. 
18.)  If  the  instrument  is  so  written  that  the  words  used 
to  indicate  to  whom  it  is  to  he  paid  do  not  appear  to  be 
the  name  of  any  person,  for  example,  a  check  payable 
to  ^'Cash,"  or  if  it  does  not  describe  any  one  with  the 
certainty  required,  (See  Sec.  1)  it  is  then,  in  either  case, 
also  payable  to  bearer.  But  the  instrument  is  probably 
not  payable  to  bearer  if  the  person  making  it  knowingly 
makes  it  payable  to  a  person  who  is  dead.  Such  an  in- 
strument would  recjuire  the  indorsement  of  the  repre- 
sentatives of  the  decedent's  estate. ^^ 

39.  Snvder  vs.   Corn  Exchange  Natl.  Bk.,  221   Pa.  599,  12S   Am. 

S.  R.  780. 
Shipman  vs.  Bank  of  K  Y.,  126  N.  Y.  .318. 

40.  Edgerton  vs.  Preston,  15  111.  A.  23. 

Jones  vs.  Home  Furnishing  Co.,  9  App.  Div.  103,  41  N.  Y. 

S.  71. 
Biyant  vs.  Eastman,  7  Cnsh.   (Mass.)  111. 

41.  Lewisohn  vs.  The  Kent  &  Stanley  Co.,  87  Hun  257. 


§  10  FORM  AND  INTERPRETATION  33 

A  negotiable  instrument  made  payable  to  order,  as 
mider  Sec.  8,  becomes  payable  to  bearer  and  can  be 
passed  by  mere  delivery  when  the  only  or  the  last  in- 
dorsement upon  it  is  in  blank.  An  indorsement  in  blank 
is  made  by  writing  one's  name  upon  the  back  of  the  in- 
strument without  any  words  indicating  another  to  whom 
it  is  to  be  paid.     (Sec.  34.) 

An  instrument  which  is  made  payable  to  bearer  or  be- 
comes so  may  be  transferred  by  mere  delivery.  (Sec. 
30.)  It  does  not  require  indorsement  by  the  holder  to 
transfer  the  title.  However,  no  person  is  liable  upon 
the  instrument,  except  as  is  otherwise  provided  in  this 
act  (Sees.  18,  19,  20),  unless  he  has  placed  his  signature 
upon  it,  and  an  instrument  negotiated  by  mere  delivery 
does  not  accumulate  the  security  which  added  indorse- 
ments give  to  one  negotiated  by  indorsement. 

Terms  when  *'Sec.  10.     The  instrument  need  not 

sufficient.  follow  the  language  of  this  act,  but 

"Wisconsin.  ^^^  tebms  aee  sufficient  which  clearly 

indicate  an  intention  to  conform  to  the  requirements 

HEREOF. ' '" 

The  Negotiable  Instruments  Act  was  not  intended  to 
make  invalid  instruments  which  are  not  written  in  the 
language  of  this  law.  Any  language,  English  or  for- 
eign,^ ^  jjiay  be  used  in  drawing  a  bill,  note  or  check  which 
will  show  clearly  that  the  parties  to  the  instrument  in- 
tended to  make  such  an  instrument  as  will  substantially 
conform  to  the  provisions  of  the  Act.  Doubt  and  uncer- 
tainty, confusion  and  delay,  expensive  litigation  and  dis- 
pute will  be  avoided,  however,  if  instruments  ordering 
or  promising  the  payment  of  money  and  which  are  in- 
tended for  negotiation,  that  is,  for  transfer  by  delivery 
or  indorsement  from  one  person  to  another  in  the  regu- 
lar course  of  trade,  are  so  written  that  there  can  be  no 

42.    Debebian  vs.  Gala,  64  Md.  262,  265. 


34  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  11 

doubt  of  their  character.  Forms  are  readily  obtainable, 
differing  not  very  materially  in  their  language  from 
those  employed  since  the  fourteenth  century,  and  wher- 
ever practicable  they  should  be  used. 

If  language  is  used  in  an  instrument  which  by  long  es- 
tablished custom  has  obtained  a  special  meaning  or  sig- 
nificance different  from  its  ordinary  meaning,  it  will  be 
interpreted  according  to  its  special  significance  unless 
to  do  so  would  ])e  clearly  inconsistent  with  the  purpose  of 
the  instrument.*^  The  provisions  of  this  Act  definitely 
fix  the  rights,  liabilities  and  duties  of  all  the  parties  to 
commercial  paper.  Its  provisions  cover  every  require- 
ment of  the  commercial  relationships  between  business 
men  and  an  instrument  executed  in  conformity  with  this 
Act  will  have  the  same  interpretation  in  every  State  in 
which  it  has  been  adopted. 

Informal  instruments  which  clearly  indicate  by  the 
terms  used  that  they  are  intended  to  be  negotiable  and 
which  are  not  lacking  in  any  of  the  essential  require- 
ments of  this  Act  will  be  construed  to  be,  and  are,  in  ef- 
fect, negotiable  instruments.** 

Date;  presump-  "Sec.  11.  Where  the  instrument  or 
tion  as  to.  ^^^     acceptance     or     any     indorsement 

thereon  is  dated,  such  date  is  deemed  prima  facie  to  be 
the  true  date  of  the  making,  drawing,  acceptance  or 
indorsement  as  the  case  may  be." 

This  section  means  that  when  an  instrument  or  an 
acceptance  upon  a  draft  or  bill  of  exchange  is  dated,  the 
date  given  is  presumed  to  be  the  date  when  it  was  made 
or  given.  Likewise  when  an  indorsement  is  dated.  But 
if  the  date  is  an  impossible  one,  then  the  nearest  or  prob- 

43.    Pilmer  vs.  Branch  of  State  Bank,  16  Iowa,  321. 

44      Owen  vs.  Blackburn,  161  App.  Div.   (N.  Y.)  827. 
Kerr  vs.  Smith,  156  App.  Div.   (N.  Y.)  807. 
Westberg  vs.  Chicago  Lbr.  Co..  117  Wise.  589. 
Gilley  vs.  Harrell,  118  Tenn.  115. 


§  12  FOKM  AND  INTERPRETATION  35 

able  one  will  be  adopted.  (April  31st  may  be  April  30th, 
or  May  1st,  probably  the  latter.)"*^  Of  course,  if  the  date 
given  is  not  really  the  date  upon  which  the  act  was  done, 
the  person  disputing  it  will  be  permitted  to  show  that  it 
is  not  the  true  date  and  if  the  question  arises  in  an  action 
upon  the  instrument  he  must  offer  some  evidence  to  sup- 
port his  contention.  If  he  does  not,  the  presumption  in 
its  favor  mil  prevail  and  the  date  upon  the  instrument, 

acceptance,  or  indorsement  will  be  taken  to  be  its  true 
date.''^ 

Antedated  and  "Sec.  12.     The  instrument  is  not  in- 

postdated.  valid  for  the  reason  only  that  it  is  an- 

tedated or  postdated,  provided  this  is  not  done  for  an 
illegal  or  fraudulent  purpose,  the  person  to  whom 
an  instrument  so  dated  is  delivered  acquires  the  titlk 
thereto  as  of  the  date  of  delivery." 

If  an  instrument  is  dated  before  (antedated)  or  later 
than  the  real  date  of  its  issue  (postdated)  or  an  indorse- 
ment or  acceptance  is  so  dated,  it  is  not  thereby  made  in- 
valid, unless  the  antedating  or  postdating  is  done  for  an 
unlawful  or  a  fraudulent  purpose.  A  postdated  instru- 
ment is  regarded  very  much  the  same  as  a  bill  payable  so 
many  days  after  sight,  and  the  person  to  whom  an  instru- 
ment so  dated  is  delivered  or  transferred  acquires  title 
to  it,  that  is,  he  becomes  its  owner,  upon  the  day  when 
it  is  delivered  or  transferred  to  him  and  he  may  nego- 
tiate it  immediately.  It  is  not  necessary  that  he  hold 
it  until  the  day  it  is  dated  before  transferring  it  to  an- 
other.^' An  instrument  so  dated,  if  payable  at  a  given 
time  after  its  date,  does  not  become  due  earlier  because 
issued  before  its  date.  The  fact  that  it  is  postdated  is 
not  sufficient  to  put  the  indorsee  upon  notice  of  irregu- 

45.  Wa^er  vs.  Kenncr,  2  Rob.  (La.)  120. 

46.  Mobley  vs.  Ryan,  14  111.  51. 

47.  Brewster  vs.  McArdle,  8  Wend.  478. 
Passmore  vs.  North,  13  East,  517, 104  Reprint,  471. 


36  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  13 

larity  or  fraud,^^  (Sec.  56)  and  the  person  who  executes 
and  delivers  a  postdated  instrument  cannot,  in  the  ab- 
sence of  any  agreement  to  the  contrary,  recall  the  in- 
strument by  reason  of  the  fact  that  it  is  dated  later  than 
the  date  of  its  issue.  He  can,  it  is  true,  countermand 
payment  of  such  an  instrument,  as  he  can  of  one  not 
postdated,  but  the  effect  of  this  would  be  merely  to  pre- 
vent its  pajTiient  when  presented.  His  countermand 
would  not  release  him  from  his  obligation  to  the  holder. ^-^ 
Even  if  the  death  of  one  of  the  parties  to  a  postdated 
instrument  occurs  before  the  day  of  its  date,  this  will 
not  render  the  instrument  invalid  and  will  not,  in  all 
cases,  amount  to  a  revocation.'^"  An  antedated  instru- 
ment can,  of  course,  be  put  in  issue  by  its  maker  at  any 
time  after  its  date.  If  it  is  payable  at  a  given  time  the 
time  of  maturity  is  not  postponed  by  the  fact  that  it  was 
delivered  later  than  its  date  and  if  it  is  issued  or  nego- 
tiated after  its  maturity  it  is,  by  the  provisions  of  Sec. 
7,  payable  upon  demand. 

When  date  may  '*Sec.  13.  Where  a^  instrument  ex- 
be  inserted.  pressed  to  be  payable  at  a  fixed  period 

AFTER  DATE  IS  ISSUED  UNDATED,  OR  WHERE  THE  ACCEPTANCE 
OF  AN  INSTRUMENT  PAYABLE  AT  A  FIXED  PERIOD  AFTER  SIGHT 
IS  UNDATED,  ANY  HOLDER  MAY  INSERT  THEREIN  THE  TRUE 
DATE  OF  ISSUE  OR  ACCEPTANCE  AND  THE  INSTRUMENT  SHALL 
BE  PAYABLE  ACCORDINGLY.  ThE  INSERTION  OF  A  WRONG  DATE 
DOES  NOT  AVOID  THE  INSTRUMENT  IN  THE  HANDS  OF  A  SUB- 
SEQUENT HOLDER  IN  DUE  COURSE  ;  BUT  AS  TO  HIM,  THE  DATE 
SO  INSERTED  IS  TO  BE  REGARDED  AS  THE  TRUE  DATE." 

If  an  instrument  or  an  acceptance  is  payable  at  a  fixed 
period  after  date  or  sight  and  it  is  issued  or  delivered 


48.  Albers  vs.  Hoffman,  64  Misc.   (N.  Y.)  87. 

49.  Usher  vs.  A.  S.  Tucker  Co.,  217  Mass.  441,  105  N.  E  360 

50.  Passmore  vs.  North,  13  East.  517,  104  Reprint,  471. 
Cutts  vs.  Perkins,  12  Mass.  206. 

Nassano  vs.  Tuolumne  County  Nat.  Bk.,  20  Cal.  A.  603,  130 
P.  29. 


§14  FORM   AND   INTERPRETATION  37 

without  bearing  a  date,  the  holder  may  insert  the  true 
date  of  its  issue  or  acceptance  for  a  date  is  then  neces- 
sary to  fix  its  maturity.  If  he  inserts  a  wrong  date  and 
the  instrument  in  due  course,  meaning,  by  a  regular 
transaction  and  for  value  before  maturity,  passes  into 
the  hands  of  another,  the  date  inserted,  even  though 
wrong,  is,  as  to  this  holder  in  due  course,  considered  to 
be  its  true  date.  As  between  the  maker  of  the  instru- 
ment or  acceptance  and  the  holder  who  has  knowingly 
inserted  a  wrong  date,  and  any  holder  taking  with  notice 
of  the  insertion  of  the  wrong  date,  it  has  been  held  that 
the  instrument  is  thereby  avoided  and  is  not  enforce- 
able.^^ And,  it  seems,  this  might  be  true  even  though 
he  has  made  the  insertion  in  good  faith  believing  it  to- 
be  the  true  date. 

Section  6  provides  that  if  the  date  is  omitted  alto- 
gether the  instrument  is  not  thereby  invalidated  and  this 
section  gives  the  holder  the  right  to  insert  the  true  date. 
It  follows,  therefore,  that  if  the  holder  of  an  undated 
instrument  or  acceptance  does  not  know  its  true  date 
he  ought  not  to  insert  any  without  the  consent  of  the 
parties  to  whom  he  looks  for  payment. 

-,,    ,        ,  "Sec.  14.     "Where  the  instrument  is 

Blanks;  wnen 

may  be  filed.         wanting  in  any  material,  particular,  the 

"Wisconsin.  person  in  possession  thereof  has  a  prima 

''Illinois.  FACIE   AUTHORITY   TO    COMPLETE   IT^  BY   FILIr- 

'^So.  Dakota.  ^^^  ^,p  ^^j,  blajtks  therein.    And  a  sig- 

nature ON  a  blank  PAPER  DELIVERED  BY  THE  PERSON  :MAK- 
ING  THE  SIGNATURE  IN  ORDER  THAT  THE  PAPER  MAY  BE  CON- 
VERTED INTO  A  NEGOTIABLE  INSTRUMENT  OPERATES  AS  A  PRIMA 
FACIE"  AUTHORITY  TO  FILL  IT  UP  AS  SUCH  FOR  ANY  AMOUNT. 
In  ORDER,  HOWEVER,  THAT  ANY  SUCH  INSTRUMENT  WHEN 
COMPLETED  MAY  BE  ENFORCED  AGAINST  ANY  PERSON  WHO  BE-. 
CAME  A  PARTY  THERETO  PRIOR  TO  ITS  COMPLETION,  IT  MUST 
BE  FILLED  UP  STRICTLY  IN  ACCORDANCE  WITH  THE  AUTHORITY 
GIVEN   AND    WITHIN    A   REASONABLE    TIME.       BUT   IF   ANY   >^rCU 

51.     Houston  Bank  vs.  Day,  145  Mo.  A.  410,  122  S.  W.  756. 


38  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  14 

INSTRUMENT,  AFTER  COMPLETION,  IS  NEGOTIATED  TO  A  HOLDER 
IN  DUE  COURSE,  IT  IS  VALID  AND  EEFECTUAL  FOR  ALL  PURPOSES 
IN  HIS  HANDS,  AND  HE  MAY  ENFORCE  IT  AS  IF  IT  HAD  BEEN 
FILLED  UP  STRICTLY  IN  ACCORDANCE  WITH  THE  AUTHORITY 
GIVEN   AND   WITHIN    A   REASONABLE   TIME/' 

This  section  grants  to  the  person  in  possession  of  the 
instrument  the  right  to  sujjply  any  material  thing  which 
may  have  been  omitted  when  it  was  executed.  Observe 
that  this  right  is  prima  facie,  that  is  to  say,  he  is  pre- 
sumed to  have  authority  to  do  so  and  this  presumption 
continues  until  the  person  who  is  affected  by  what  he 
does  disputes  it  and  is  able  to  show  by  some  evidence 
that  he  either  had  not  this  authority,  or  if  he  had,  that 
it  has  not  been  properly  exercised.  If  the  omissions  are 
correctly  supplied  and  not  made  contrary  to  the  terms  of 
the  transaction  out  of  which  the  instrument  arose,  the 
right  to  make  them  will  have  been  properly  exercised.'^ 

This  section  also  provides  that  when  a  paper  which 
is  intended  to  be  used  as  a  negotiable  instrument,  and 
it  is  important  that  it  must  have  been  so  intended, ^^  is 
signed  in  blank,  that  is,  without  having  been  filled  out  as 
to  the  date,  amount,  to  whom,  and  the  time  when  it  is 
payable,  or  in  one  or  some  of  these  particulars,  or  even 
if  a  blank  piece  of  paper  is  signed  by  any  person  and 
delivered  to  another  in  order  that  it  may  be  converted 
into  and  used  as  a  negotiable  instrument,  the  one  to  whom 
it  is  given  has  the  right  to  supply  the  omissions  or  to 
write  over  the  blank  signature  words  which  will  con- 
vert the  blank  paper  into  a  negotiable  instrument  for 
any  amount.  The  person  who  thus  supplies  omissions  or 
fills  up  such  a  paper  cannot  himself  enforce  its  payment 

52.  Younc:  vs.  Baker,  29  Ind.  A.  130.  64  X.  E.  54. 
Marshall  vs.  Drescher,  68  Ind.  359. 
Weyerhauser  vs.  Dunn,  100  N.  Y.  150. 

53.  Iowa  St.  Bank  vs.  Claypool,  91  Kas.  at  251. 
Richards  vs.  Day,  137  N.  Y.  183. 


§14  FORM  AND   INTERPRETATION  39 

by  the  one  who  signed  it  in  blank,  unless  he  has  filled  it 
up  strictly  in  accordance  with  the  authority  which  the 
signer  gave  him  to  do  so,  and  unless  he  has  done  it  within 
a  reasonable  time  after  its  delivery  to  him.  Nor  can  any 
one  who  is  not  a  holder  in  due  course  enforce  it,  unless 
it  was  so  done.  And  if  one  transfers  such  an  instru- 
ment to  another  without  first  completing  it  in  accord- 
ance with  his  authority,  his  transferee  will  not  be  deemed 
a  holder  in  due  course  and  cannot  recover  upon  it.^^ 

But  if  after  completion  by  any  one  the  instrument  is 
negotiated  in  due  course,  that  is,  transferred  before  its 
maturity  in  a  regular  transaction  for  a  valuable  con- 
sideration to  some  other  person  Avho  had  no  knowledge 
and  is  not  in  law  chargeable  with  notice  or  any  duty  to 
know  that  it  was  incomplete  when  delivered,  and  not 
afterward  completed  in  strict  accordance  with  the  au- 
thority given  within  a  reasonable  time  after  being  signed 
in  blank,  such  a  holder  and  subsequent  holders  for  value 
can  enforce  it  against  the  signers  in  blank  even  if  the 
person  who  filled  up  the  blanks  or  converted  into  a  nego- 
tiable instrument  the  signed  blank  piece  of  paper,  did 
not  do  so  in  strict  accordance  with  his  authority,  and 
within  a  reasonable  time  after  it  was  so  signed.  Signers 
in  blank  cannot  resist  payment  of  an  instrument  in  the 
hands  of  a  holder  in  due  course,  even  if  it  has  not  been 
filled  up  and  issued  in  accordance  with  the  authority 
under  which  it  was  given. 

The  particular  circumstances  of  each  case  in  which  the 
question  of  the  proper  exercise  of  authority  to  fill  in 
blank  instruments  arises  will  be  inquired  into  and  if 
there  is  doubt  about  the  authority  of  the  person  who  fills 

54.     Stone  vs.  Sargent,  220  Mass.  445. 
Tower  vs.  Stanley,  220  Mass.  429. 
Hartington  Bk.  vs.  Rreslin,  88  Neb.  47. 
Boston  Steel  &  Iron  Co.  vs.  Steuer,  183  Mass.  140. 


40  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  14 

it  up,  either  of  his  right  to  do  it  or  his  right  to  fix  the 
amount  of  the  instrument,  the  one  to  whom  such  paper  is 
offered  may  be  put  upon  inquiry  if  any  suspicious  cir- 
cumstances appear  from  the  instrument  itself ;  and  if  he 
is  chargeable  with  notice,  he  cannot  recover  upon  the 
instrument  if  the  person  who  filled  it  up  exceeded  his 
authority  in  doing  so.    Notice  is  defined  in  Sec.  56. 

The  authority  given  by  this  section  to  fill  up  blank 
spaces  in  the  instrument  extends  to  the  person  in  posses- 
sion the  right  to  fill  up  such  blanks  as  are  obviously  and 
intentionally  left  unfilled,  but  the  section  is  not  intended 
to  and  does  not  grant  the  right  to  fill  in  any  spaces  upon 
the  instrument  which  are  not  occupied  by  written  or 
printed  words,  by  writing  additional  words  or  figures 
upon  it  when  the  instrument  is  not  signed  in  blank  and 
is  otherwise  complete.  Numerous  decisions  are  to  be 
found  in  the  reports  of  all  of  the  States  upon  this  subject, 
the  courts  expressing  widely  diverging  views.  These 
cases  have  nearly  always  grown  out  of  instruments  upon 
which  blank  spaces  have  not  been  filled  up  by  lining  them 
out  when  the  Avords  or  figures  written  in  the  instrument 
do  not  fully  occupy  the  spaces  intended  for  their  inser- 
tion. Because  of  the  opportunity  thus  given  to  alter  the 
instrument,  dishonest  persons  have  been  enabled  to 
change  its  amount  without  in  any  way  indicating  that  a 
fraudulent  change  has  been  effected.  Of  course,  an  obli- 
gation rests  upon  every  signer  of  a  negotiable  instru- 
ment to  so  prepare  it,  or  to  see  that  at  the  time  he  at- 
taches his  signature  to  the  instrument  it  is  made  out  in 
such  a  way  that  it  cannot  readily  be  changed  by  fraud  in- 
tending persons  into  any  different  contract  from  that 
which,  on  its  face,  it  purports  to  be.  But  he  is  not  bound 
to  so  prepare  it  that  it  is  impossible  to  change  it.''^ 

55.     Otis  El.  Co.  vs.  First  Nat.  Bk.,  163  Cal.  31,  124  P.  704,  41 
L.  R.  A.  (N.  S.)  529  and  Note 


§14  FOKM   AND   INTERPRETATION  41 

The  strong  presumption  exists  that  all  men  are  honest, 
and  if  an  instrument  which  is  complete  when  delivered, 
even  though  it  is  so  filled  out  that  it  is  possi))le  to  change 
its  amount  by  inserting  additional  words  and  figures 
in  it,  and  it  is  so  altered,  this,  of  itself,  is  not  sufficient 
to  make  liable  for  the  altered  sum  the  person  whose  ob- 
ligation it  is.  For  example,  if  a  promissory  note  is  writ- 
ten for  seventy-five  dollars  and  these  words  and  figures 
are  written  into  it,  but  in  such  a  manner  that  a  space  is 
left  before  the  first  word  and  figure,  and  such  an  instru- 
ment is  afterward  fraudulently  raised  by  adding  the 
words  ''one  hundred"  before  "seventy-five"  and  the 
figure  1  before  75,  thereby  changing  it  to  a  note  for  one 
hundred  and  seventy-five  dollars,  the  alteration  will  be 
considered  material  alteration  and  the  instrument  un- 
enforceable in  the  raised  amount.  On  such  a  note  the 
parties,  except  those  who  became  parties  after  the  altera- 
tion, would  be  liable  only  in  the  original  amount.^^  (Sec. 
125.)  Aside  from  the  instrument,  however,  they  might 
be  liable  to  a  holder  in  due  course  for  the  full  amount 
of  the  altered  sum  as  damages,  if  their  carelessness  was 
responsible  for  the  fraud  and  his  injury,  and  they  would 
be  if  their  negligence  amounted  to  an  estoppel."'^  But- 
this  is  a  different  subject  and  it  is  only  referred  to  in 
order  to  illustrate  the  importance  of  properly  making 
out  a  negotiable  instrument.  When  the  written  words 
and  figures  do  not  completely  fill  the  blank  spaces,  draw 

Garrard  vs.  Hadden,  67  Pa.  St.  82. 

Yocum  vs.  Smith,  63  111.  321. 

Scotland  Co.  Nat.  Bk.  vs.  O'Connell,  23  Mo.  App.  165. 

Hacket  vs.  First  Nat.  Bk.  of  Louisville,  114  Ky.  193. 

56.  Greenfield  Savgs.  Bk.  vs.  Gray,  123  Mass.  196. 

Nat.  Exchange  Bk.  vs.  Lester,  194  N.  Y.  461,  87  N.  E.  771,. 
21  L.  R.  A.  (N.  S.)  402,  where  cases  are  reviewed. 

57.  Holmes  vs.  Tnimper,  22  Mich.  427. 

Otis  El.  Co.  vs.  First  Natl.  Bk.,  163  Cal.  31,  41  L.  R.  A. 
(N.  S.)  529,  124  S.  704. 


42  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  15 

a  line  through  the  unoccupied  parts.  Consult  section  6 
for  the  right  to  supply  omissions,  section  23  for  what 
constitutes  a  forgery  and  sections  124  and  125  for  what 
are  material  alterations  and  their  effect  upon  the  instru- 
ment. 

Incomplete  ''Sec.   15.     Where  an  incomplete  in- 

instrument  not      strument  has  not  been  delivered  it  will 

delivered.  :soT,  if  completed  and  negotiated,  with- 

"Wisconsin.  ' 

OUT  authority,  be  a  valid   contract  in 

THE  hands  of  any  HOLDER,  AS  AGAINST  ANY  PERSON  WHOSE 
signature    WAS    PLACED    THEREON    BEFORE    DELIVERY.'"" 

An  initial  delivery  is  essential  to  the  validity  of  an 
incomjDlete  negotiable  instrument. 

Now,  if  a  bill,  note,  check,  or  other  negotiable  instru- 
ment is  incomplete  on  its  face,  or  is  signed  in  blank,  but 
not  voluntarily  delivered  by  the  person  whose  obligation 
it  is  to  become  after  it  has  been  lawfully  completed  and 
has  had  a  valid  initial  delivery,  and  such  an  instrument 
is  negotiated  without  authority,  it  does  not  bind  any  one 
whose  signature  was  placed  upon  it  before  its  unlawful 
negotiation,  even  if  it  is  presented  in  the  hands  of  a 
holder  in  due  course. ^^  And  when  an  instrument  which  is 
apparently  complete  but  is  not  so  because  it  lacks  the 
signature  of  additional  parties  who  are  to  sign  it  has  been 
delivered  under  an  agreement  that  it  is  not  to  take  effect 
until  the  additional  signatures  are  obtained,  such  an 
instrument  is  not  a  valid  instrument  between  the  original 
parties  or  a  subsequent  holder  taking  with  notice. ^^  (See 
Sec.  55.) 

But  persons  who  become  parties  to  an  incomplete 
undelivered  instrument  after  it  has  been  wrongfully  com- 
pleted and  negotiated  will  be  liable  upon  it  to  a  subse- 
quent holder  in  due  course,  because  the  contract  is  theirs 

58.  Linick  vs.  Nuttino:,  140  App.  Div.  2G5.  267,  12.5  N.  Y.  S.  93. 
Nance  vs.  Laiy,  5  Ala.  370. 

59.  Hodge  vs.  Smith,  130  Wis.  326. 


§16  FORM   AND   INTERPRETATION  43 

in  the  rorm  in  which  they  signed  it.  The  next  section 
will  inform  you  when  and  under  what  circumstances  an 
instrument  is  deemed  to  be  incomplete.  (Also  see  Sees. 
55  and  184.) 

Delivery;   when  ''Sec.  1(3.     Every  conieact  on  a  nego- 

effectual;  when  ^j^^le    instrument    is    incomplete    and 

Sorth^^c'arolina.  RI^vocable  until  delivery  of  the  instru- 

ftKansas.             *  ment  for  the  purpose  of  giving  effect 

S.  Dakota.      .  thereto.    As  between  immediate  parties, 

AND  AS  REGARDS  A  REMOTE  PARTY  OTHER  THAN  A  HOLDER  IN 
DUE  COURSE,  THE  DELIVERY,  IN  ORDER  TO  BE  EFFECTUAL,  MUST 
BE  MADE  EITHER  BY  OR  UNDER  THE  AUTHORITY  OF  THE  PARTY 
MAKING,  DRAWING,  ACCEPTING"  OR  ENDORSING,  AS  THE  CASE 
MAY  BE  ;  AND  IN  SUCH  CASE  THE  DELIVERY  MAY  BE  SHOWN  TO 
HAVE  BEEN  CONDITIONAL,  OR  FOR  A  SPECIAL  PURPOSE  ONLY, 
AND  NOT  FOR  THE  PURPOSE  OF  TRANSFERRING  THE  PROPERTY 
IN  THE  INSTRUMENT.''  BuT  WHERE  THE  INSTRUMENT  IS  IN 
THE  HANDS  OF  A  HOLDER  IN  DUE  COURSE,  A  VALID  DELIVERY 
THEREOF  BY  ALL  PARTIES  PRIOR  TO  HIM  SO  AS  TO  MAKE  THEM 
LIABLE  TO  HIM  IS  CONCLUSIVELY  PRESUMED.  AnD  WHERE 
THE  INSTRUMENT  IS  NO  LONGER  IN  THE  POSSESSION  OF  A  PARTY 
WHOSE  SIGNATURE  APPEARS  THEREON,  A  VALID  AND  INTEN- 
TIONAL DELIVERY  BY  HIM  IS  PRESUMED  UNTIL  THE  CONTRARY 
IS   PROVED.'' 

Like  other  contracts,  a  negotiable  instrument  has  no 
valid  inception  until  it  has  been  delivered  by  the  maker 
or  drawer  for  the  purpose  of  giving  effect  to  it.  The 
contract  of  indorsement  is  incomplete  until  the  indorser 
delivers  the  instrument  to  his  transferee  for  the  pur- 
pose of  giving  effect  to  his  indorsement,  and  the  contract 
of  the  acceptor  is  incomplete  until  he  returns  the  ac- 
cepted instrument  to  the  holder  for  the  purpose  of  giving 
effect  to  his  acceptance  or  notifies  him  of  the  accept- 
ance. (Sec.  191.)  In  every  case  the  contract  is 
revocable  until  it  is  delivered  for  the  purpose  of  giving 
effect  to  it ;"«  and  as  to  all  parties  except  a  holder  in  due 

60.     Burson  vs.  Huntincrton,  21  Mich.  410,  431. 
Burr  vs.  Beckler,  264  111.,  230. 


44  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  16 

course,  the  delivery  is  not  effectual,  that  is  completed 
and  binding  unless  it  is  made  by  the  party  who  issues, 
accepts  or  indorses  the  instrument  or  by  his  authority. 
x\nd,  except  when  the  instrument  is  in  the  hands  of  a 
holder  in  due  course,  it  can  in  every  case  be  shown  that 
the  delivery  was  not  for  the  purpose  of  giving  effect  to 
instrument  or  transferring  its  ownership,  if  it  is  a  fact 
that  its  effective  delivery  was  not  intended.  But  if  one's 
signature  appears  anywhere  upon  a  nego'tiable  instru- 
ment and  the  instrument  is  no  longer  in  his  possession  an 
intentional  and  valid  delivery  by  him  to  any  one  who 
holds  it  will  be  presumed  until  he  is  able  to  show  that  he 
did  not  deliver  or  intend  to  deliver  the  instrument  to  the 
holder,  or  any  other  prior  party,  for  the  purpose  of 
transferring  the  ownership  of  the  instrument.^^ 

But  now  observe  that  when  an  instrument  which  is 
complete  in  every  other  respect  except  delivery,  comes 
into  the  hands  of  a  holder  in  due  course,  (see  sec.  53 
for  definition)  a  valid  delivery  by  all  persons  whose 
signatures  appear  upon  it  when  it  reaches  him  is  con- 
clusively presumed,  that  is  to  say,  the  contrary  cannot 
be  shown,  as  to  him,  even  if  it  is  true.  All  parties  upon 
the  instrument  are  liable  to  this  holder  in  due  course  not- 
withstanding any  rights  or  defenses  they  may  have 
among  themselves.*^^ 

By  reason  of  this  section  a  holder  in  due  course  of  a 
negotiable  instrument  which  at  its  inception  was  com- 
plete in  every  other  respect  except  delivery*^^  can  enforce 
it  against  all  parties,  and  all  parties  are  liable  thereon 
to  him  if  the  instrument,  after  completion,  was  lost  by 

61.  Hill  vs.  Hall,  191  Mass.  253. 
Niblock  vs.  Sprague,  200  N.  Y.  390. 
Hodge  vs.  Smith,  130  Wise.  326. 

62.  Buzell  vs.  Tobin,  201  Mass.  1. 

63.  Schaefifer  vs.  Marsh,  90  Misc.  (N.  Y.)  307. 


§17  FORM   AND    INTERPRETATION  45 

or  stolen  from  them,  or  any  of  them,  or  from  some  one 
not  a  party  to  it,  or  its  issue  was  obtained  by  fraud."^ 
However,  the  hohler  of  a  stok'ii  instrument  has  the  bur- 
den of  proving  that  he  is  a  holder  in  due  course.  But 
this  is  sufficiently  established  if  he  shows  that  he  derives 
his  title  from  a  holder  in  due  course  when  he  does  not  him- 
self ))ossess  the  necessary  qualifications.^^.  (Sees.  57 
and  58.) 

_,,       ,  „  "  Sec.  1 7.    Where  the  language  of  the 

When  language 

of  instrument  is  instrument  is  ambiguous  or  there  are 
ambiguous.  omissions  therein,  the  following  rules 

«N.  Carolina.  of  construction  apply: 

''Wisconsin.  ^        Where    the    sum    payable    is    ex- 

pressed IN  WORDS  and  also  IN  FIGURES  AND  THERE  IS  A  DIS- 
crepancy between  the  two,  the  sum  denoted  by  the 
words  is  the  sum  payable:  but  if  the  words  are  am- 
biguous or  uncertain,  reference  may  be  had  to  the  fig- 
ures to  fix  the  amount  ; 

2.  "Where  the  instrument  provides  for  the  payment 
OF  interest,  without  specifying  the  date  from  which 
interest  is  to  run,  the  interest  runs  from  the  date  of 
the  instrument,  and  if  the  instrument  is  undated,  from 
.the  issue  thereof  ; 

3.  Where  the  instrument  is  not  dated,  it  will  be 
considered  to  be  dated  as  of  the  time  it  was  issued  ; 

4.  Where  there  is  a  conflict  between  the  written 
and  printed  provisions  of  the  instrument,  the  written 
provisions  prevail  ; 

5.  Where  the  instrument  is  so  ambiguous  that  there 
IS  doubt  whether  it  is  a  bill  or  note,  the  holder  may 
treat  it  as  either,  at  his  election. 

6.  Where  a  signature  is  so  placed  upon  the  instru- 
ment THAT  it  is  not  CLEAR  IN  WHAT  CAPACITY  THE  PERSON 
MAKING  THE  SAME  INTENDED  TO  SIGN,  HE  IS  TO  BE  DEEMED 
AN  indorser; ^___ 

64.  Massachusetts  Natl.  Bk.  vs.  Snow,  187  Mass.  160. 
Jefferson  Bk.  vs.  Cliainnan,  122  Tenn.  415. 

City  of  Adrian  vs.  Whitney  Center  Nat.  Bk..  180  IMich. 
171,  179. 

65.  Nortliamiitoti    Natl.   Bk.   vs.  Kidder,   106  N.   Y.   221. 
Hinkley  vs.  Merch.  Bank,  131  Mass.  147. 


46  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  17 

7.     Where  an  instrument  containing  the  words  ''I 

PROMISE  TO  PAY'^  IS  SIGNED  BY  TWO  OR  MORE  PERSONS,  THEY 

are  deemed  to  be  jointly  and  severally  liable  there- 
on/'* 

When  the  meaning  of  the  instrument  or  of  any  words 
or  terms  used  in  it  is  not  clear  the  seven  rules  given  in 
this  section  govern  in  its  construction.  They  cover  the 
ambiguities  most  frequently  met  with  in  negotiable  in- 
struments. 

The  first  fixes  the  written  words  which  express  the  sum 
payable  as  determining  the  amount  to  be  paid  upon  the 
instrument.  Of  course,  an  effort  must  be  made  to  recon- 
cile the  words  and  figures  and  they  ought  to  be  consid- 
ered together  but,  strictly  speaking,  the  marginal  figures 
form  no  part  of  the  instrument;  the  words  control.  To 
such  an  extent  is  this  true,  that  the  holder  may  with  im- 
punity change  the  marginal  figures  to  make  them  agree 
with  the  body  of  the  instrument.^^ 

The  second  establishes  that  an  instrument  payable 
with  interest  bears  interest  from  its  date,  unless  it  clearly 
specified  that  it  does  not  begin  to  run  until  a  later  time. 
If  it  is  not  dated  and  its  true  date  is  not  supplied  and 
inserted  by  the  holder,  as  he  has  a  right  to  do  under 
Sees.  13  and  14,  then  interest  commences  from  the  date 
of  the  delivery  of  the  instrument  to  the  first  person  who 
received  it  from  the  maker  or  drawer.  If  the  instru- 
ment does  not  expressly  declare  that  it  bears  interest, 
and  unless  it  expressly  provides  that  it  shall  not,  it  will 
draw  interest  from  the  date  of  its  maturity  until  paid, 
at  the  legal  rate  in  effect  at  its  maturity.  The  Act  does 
not  itself  contain  a  provision  to  this  effect,  but  such  is 
the  universal  law  and  in  this  case  interest  is  considered 

66.     Smith  vs.  Smith,  1  R.  I.  398,  53  Am.  D.  652. 
Shreyer  vs.  Hawkes,  22  Ohio  St.  308. 
Nonv'ich  Bk.  vs.  Hyde,  13  Conn.  281. 


§  17  FORM   AND   INTERPRETATION  47 

to  be  in  the  nature  of  damages  for  the  failure  to  pay  the 
debt  on  the  date  when,  by  its  terms,  the  instrument  ought 
to  have  been  paid.^^ 

The  third  supposes  that  the  date  omitted  has  not  been 
supplied  by  any  holder  and  in  that  event  the  instrument 
is  considered  to  bear  the  date  of  the  day  when  it  was 
issued  by  the  maker  or  drawer. 

The  fourth  establishes  in  respect  to  the  whole  instru- 
ment that  when  there  is  a  difference  or  conflict  between 
its  Avritten  and  printed  parts  the  written  parts  prevail, 
that  is,  they  are  considered  to  express  the  true  meaning 
of  the  instrument,  regardless  of  any  contradiction  which 
may  appear  in  its  printed  portions,  if  the  two  cannot  be 
reconciled/"- 

The  tilth  permits  the  holder  of  an  instrument  which, 
by  reason  of  ambiguity  in  the  words  employed  in  draw- 
ing it,  may  be  either  a  promissory  note  or  a  draft,  to 
consider  it  as  either,  whichever  he  may  choose.  How- 
ever, if  he  once  elects  to  consider  the  instrument  a  note, 
and  treats  it  accordingly,  he  cannot  later  change  his  mind 
and  treat  it  as  a  bill  of  exchange,  or  just  the  other  way.^* 

By  the  sixth,  it  is  established  that  if  one  places  his 
signature  anywhere  upon  the  instrument  in  such  a  way 
that  it  is  not  clear  in  what  capacity  he  intended  to  be 
bound  by  it,  he  is  considered  an  indorser,  entitled  to  an 
indorser's  rights  and  liable  only  as  such.'^"  (See  sections 
63  and  64.) 

If  two  or  more  persons  sign  a  promissory  note  upon 
its  face  and  it  contains  a  promise  in  the  singular  num- 

67.  O'Brien  vs.  Young,  95  N.  Y.  428. 

68.  Miller  vs.  Hannibal,  Etc.,  R.  R.  Co.,  90  N.  Y.  430. 

69.  Dennett  vs.  Codman,  16S  Mass.  468,  47  N.  E.  131. 

Arch.  Stone  Co.  vs.  St.  Louis,  138  Mo.  608,  39  S.  W.  467. 
Terr>-  vs.  Munger,  121  N.  Y.  161,  169. 

70.  Germania  Natl.  Bk.  vs.  Mariner,  129  Wis.  544,  100  N.  W.  574. 


48  THE  NEGOTIABLE  INSTRUMENTS  LAAY         §18 

ber,  "I,"  then  each  is  severally  liable,  that  is,  each  is 
liable  to  the  holder  for  the  full  sum  promised,  and  all 
are  as  well  jointly  liable,  that  is,  liable  together,  for  the 
debt.  The  importance  of  the  distinction  between  the 
joint  or  several  liability  of  the  parties  is  a  matter  more 
particularly  for  consideration  when  it  becomes  neces- 
sary to  bring  an  action  upon  the  instrument,  and  then, 
of  course,  parties  jointly  liable  must  be  joined  in  the 
suit.'^^  If  the  liability  of  the  parties  upon  the  instrument 
is  joint  and  several,  separate  actions  may  be  maintained 
against  each  or  they  may  be  joined  in  one.'^^ 

''Sec.  18.  No  person  is  liable  on  the 
Only  persons  instrument  whose  signature  does  not  ap- 
sigmng  liab  e-—  -p^j^^  thereon,  except  as  herein  other- 
liability  of  per-  '  „  -r, 

sons  signing  in  ^^^^^  expressly''  provided.  But  one  who 
trade  or  assumed  signs  in  a  trade  or  assumed  name  will  be 
name.  liable  to  the  same  extent  as  if  he  signed 

-Wyoming.  ^^  ^jg  own  name/' 

While  this  section  provides  that  no  person  whose  sig- 
nature does  not  appear  upon  the  instrument  is  liable 
upon  it,  it  is  not  to  be  inferred  that  he  must  himself  have 
signed  it.  There  is  an  exception  to  this  rule  as  will  ap- 
pear in  the  next  two  sections. 

When  any  person  conducts  his  business  under  a  trade 
name,  or  any  one  assumes  a  name  not  his  own  for  busi- 
ness purposes,  or  for  a  particular  transaction  as  a  substi- 
tute for  his  own,  and  places  his  trade  name,  or  the  name 
Avhich  he  has  assumed  upon  a  negotiable  instrument,  he 
is  liable  in  the  same  manner  and  to  the  same  extent  as  he 
would  be  if  he  had  signed  his  o^^m.  The  holder  of  an 
instrument  signed  in  this  manner  may  present  it  to  the 
person  thus  signing  it  and  all  notices  required  by  other 
sections  of  this  Act  may  be  given  to  him  in  either  his 

71.  Foster  vs.  Collner,  107  Pa.  305. 
Erwin  vs.  Scotten,  40  Ind.  389. 

72.  Hodgens  vs.  Jennings,  148  App.  Div.  879,  133  N.  Y.  S.  584. 


§19  FORM   AND   INTERPRETATION  49 

trade  or  assumed  name,  or  in  his  real  name,  if  it  is 
known. '3  It  is  not  necessary  that  they  be  given  in  both, 
but  it  is  good  practice  to  do  so.  He  may  be  sued  in  his 
trade  name  or  his  real  name.'^* 

An  instrument  which  is  made  payable  to  a  person 
under  his  assumed,  business  name,  does  not,  by  the  effect 
of  Section  9,  Sub-section  3,  become  payable  to  bearer, 
although  that  name  is,  strictly  speaking,  the  name  of  a 
fictitious  person.*^^ 

Signature  by  ' '  Sec.  19.  "The  signature  of  any  party 

agent;  authority,  may  be  made  by  a  duly  authorized  agent. 
how  shown.  ^o  particular   form   of   appointment  is 

"Kentucky.  xecessary  for  this  purpose  ;  and  the  au- 

thority OF  the  agent  may  be  established  as  in  other 

CASES   OF   agency." 

One  need  not  himself  sign  his  name  to  the  instru- 
ment. He  may  authorize  another  to  do  it  for  him.  The 
one  signing  for  him  is  called  his  agent,  and  his  authority 
may  be  either  oral  or  in  writing,  or  it  may  even  be  im- 
plied. It  is  implied  when  one  person  has  knowingly  per- 
mitted another  to  do  this  for  him  a  sufiScient  number  of 
times  to  amount  to  a  practice'^*'  and  it  has  become  gen- 
erally knoAvn,' '  or  if  he  has  stood  by  without  objection, 
in  apparent  acquiescence,  when  it  was  done  in  his  pres- 
ence, or  does  not  repudiate  it  when  notice  of  the  fact  is 
given  him  in  such  a  manner  and  under  such  circum- 
stances as  require  him  to  speak.'^^  If  this  can  be  shown 
the  person  whose  name  is  signed  upon  the  instrument 

73.  Union  Brewing  Co.  vs.  State  Bank,  240  HI.  454. 

74.  Bresee  vs.  Snyder,  94  Nebr.  3S4.  143  N.  W.  219. 
Alabama  Coal  Min.  Co.  vs.  Brainard,  35  Ala.  476. 

75.  Jones  vs.  Home  Furn.  Co.,  9  App.  Div.  103.  41  N.  Y.  S.  71. 

76.  Crocker  vs.  Cohvell,  46  N.  Y.  212. 
DeWitt  vs.  Walton,  9  N.  Y.  571. 

77.  Mfrs.  &  Meroh.  Bk.  vs.  FoUett,  11  R.  I.  92. 

78.  R.  R.  Co.  vs.  Cowell,  28  Pa.  St.  329. 

Cornerstone  Bk.  vs.  Rliodes.  5  Ind.  T.  256.  260.  82  S.  W.  739, 
67  L.  R.  A.  812. 


50  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  20 

by  another  is  liable  upon  it.  When  the  signature  is  made 
by  a  person  who  appears  to  be  acting  in  the  capacity  of 
a  kno\Mi  agent  and  assumes  to  sign  another's  name  to 
an  instrument,  in  the  absence  of  express  authority,  the 
transaction  of  which  the  instrument  forms  a  part  must 
be  of  the  same  general  character  as  others  in  which  the 
principal  has  permitted  the  agent  to  act,  and  if  there 
is  such  a  substantial  difference,  either  in  the  character 
of  the  transaction  or  the  amount  involved  as  would  place 
an  ordinarily  prudent  man  upon  his  guard  and  make  him 
suspicious  of  the  agent's  right  to  sign  his  principal's 
name,  the  one  to  whom  such  an  instrument  is  oft'ered 
ought  not  to  accept  it  without  first  satisfying  himself 
that  the  agent  has  acted  by  the  authority  of  the  person 
for  whom  he  claims  to  act,  and  within  the  limits  of  the 
authority  which  he  appears  to  have.  The  authority,  or 
the  lack  of  it,  may  be  established  as  in  other  cases  of 
agency  and  it  is  a  familiar  doctrine  of  the  law  of  agency 
that  general  authority  given  by  one  person  to  another  to 
conduct  his  business,  implies  the  authority  to  borrow 
money  in  his  name  for  the  needs  of  the  business  and  the 
power  to  execute  or  indorse  commercial  paper  for  that 
purpose. ^'■'  The  duty  to  inquire  into  the  actual  authority 
of  an  agent  who  signs  by  virtue  of  written  power  is  dis- 
cussed under  Section  21. 

Liability  of  '*Sec.    20.      Where    the    instrument 

persons  signing  contains  Or  a  person  adds  to  his  sicna- 
as  agent,  etc.  ture  words  indicating  that  he  signs  for 
"Virginia.  ^^  ^^^  behalf  of  a  principal,  or  in  a  rep- 

resentative CAPACITY,'*  HE  IS  NOT  LIABLE  ON  THE  INSTRU- 
MENT IF  HE  WAS  DULY  AUTHORIZED  ;  BUT  THE  MERE  ADDITION 
OF  WORDS  DESCRIBING  HIM  AS  AN  AGENT,  OR  AS  FILLING  A 
REPRESENTATIVE  CHARACTER,  WITHOUT  DISCLOSING  HIS 
PRINCIPAL,  DOES  NOT  EXEMPT  HIM  FROM  PERSONAL  LIA- 
BILITY". ' ' 

79.     Valequette  vs.  Clark  Bros.  Coal  Min.  Co.,  S3  Vt.  53S. 


§20  FORM   AND   INTERPRETATION  51 

An  agent  who  signs  his  name  to  an  instrument  in  such 
a  manner  that  his  signature  shows  or  the  instrument  it- 
self upon  its  face,  or  anywhere,  contains  words  which 
show  that  in  making,  indorsing  or  accepting  it  he  is  act- 
ing in  behalf  of  another  and  for  whom,  is  not  himself 
liable  upon  it  and  cannot  be  held  to  pay  it.^<>  He  must, 
of  course,  act  mthin  his  authority  otherwise  he  is  liable 
as  though  he  were  acting  for  himself.^^  If  he  has  acted 
by  and  within  the  limits  of  the  authority  granted  to  him 
by  his  principal  and  the  instrument  discloses  the  name  of 
his  principal,  the  latter,  and  not  the  agent,  will  be  bound 
upon  it.  (Sec.  19.)  But  if  he  merely  describes  himself 
as  an  agent,  and  the  instrument  contains  words  which 
show  that  he  is  acting  for  another  without  disclosing 
the  name  or  identity  of  the  person  or  persons  for  whom 
he  is  acting,  he  will  not  be  relieved  of  personal  liability 
to  the  holder  unless  the  latter  knows  the  nature  and  the 
object  of  the  instrument  and  takes  it  with  knowledge 
that  the  agent  is  authorized  and  acting  in  a  representa- 
tive capacity  and  knows  the  name  of  the  person  foi 
whom  he  is  acting  and  that  he  does  not  intend  to  be  in- 
dividually bound  upon  it.^^ 

80.  Hitchcock  vs.  Buchannan,  105  U.  S.  416,  26  L.  Ed.  1078. 
Continental  Natl.  Bk.  vs.  Heilman,  81  Fed.  36   (Aff.  86  Fed. 

514). 
Germania  Natl  Bk.  vs.  Mariner,  129  Wis.  544,  546,  100  N.  W. 

574. 
Chipman  vs.  Foster,  119  Mass.  189. 
Carpenter  vs.  Famsworth,  106  Mass.  561,  8  Am.  St.  R.  360. 

81.  Tuttle  vs.  Greenfield  First  Nat.  Bk.,  187  Mass.  533,  105  Am. 

S.  R.  563. 
Bank  vs.  Loonev,  99  Tenn.  278. 

82.  Metcalf  vs.  Williams,  104  U.  S.  93,  98. 

Kirbv  vs.  Ruej^amer,  107  App.  Div.  491.  95  N.  Y.  Supp.  408. 
Merch.  Natl.  Bk.  vs.  Clark,  139  N.  Y.  314,  34  N.  E.  910,  36 

Am.  S.  R.  710. 
Casco  Natl  Bk.  vs.  Clark,  139  N.  Y.  307,  34  N.  E.  910,  36 

Am.  S.  R.  705. 
Keidan  vs.  Winegar,  95  Mich.  430,  54  N.  W.  901,  20  L.  R.  A 

705. 
Ne\Ai)ort  vs.  Smith,  61  Minn.  277. 


52  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  20 

The  holder  of  such  an  instrument  may  recover  from 
the  agent  or  from  his  principal  when  he  learns  for  whom 
he  aeted.*^  He  must,  within  a  reasonable  time  after  the 
principal's  name  becomes  known,  elect,  that  is,  choose 
which  one,  the  agent  or  the  principal,  he  will  hold  and 
will  be  bound  by  his  election.^'  If  he  chooses  to  hold  the 
principal,  he  may  recover  from  him  upon  the  original 
consideration  for  the  instrument  but  not  upon  the  in- 
strument itself,^^  for  only  those  persons  are  liable  upon 
the  instrument  whose  names  appear  upon  it.     (Sec.  18.) 

If  the  agent  signs  the  instrument  without  authority  he 
is  personally  liable  whether  it  discloses  the  name  of  his 
pretended  principal  or  does  not.^*'  Whatever  conflict  of 
authority  has  heretofore  existed  as  to  the  agent's  liability 
upon  the  instrument,  and  there  have  been  decisions  on 
both  sides  of  this  question  here  and  in  England,  is  settled 
by  this  section.  In  some  jurisdictions  it  has  been  held 
that  an  agent  signing  without  authority  or  failing  to 
disclose  his  principal,  is  not  liable  upon  the  instrument, 
for  the  reason  that  the  contract  is  not  his.^'^  He  was, 
therefore,  in  some  jurisdictions,  held  liable,  not  on  the  in- 
strument itself,  but  for  the  damage  resulting  from  his 
unlawful  or  unauthorized  act.^^  In  others,  his  liability 
was  held  to  be  upon  the  instrument.^*^    Now,  however,  he 

83.  Kavton  vs.  Bamett,  116  N.  Y.  625,  23  N.  E.  24. 
Chemical  Natl.  Bk.  vs.  City  Bank,  156  III.  149,  40  N.  E.  328. 
Lovell  vs.  Williams,  125  Mass.  439. 

84.  Meehem  Agency,  Sec.  173  and  Notes. 

85.  Coalino'  Co.  vs.  Howard,  130  Ga.  807,  21  L.  R.  A.  (N.  S.)  1051. 
Harper  vs.  Tiffin  Nat.  Bk.,  54  Oh.  St.  425.  44  X.  E.  97. 

86.  Meehem  Agency,  Sec.  1374. 

87.  Coaling  Co.  vs.  Howard,  130  Ga.  807,  21  L.  R.  A.  (N.  S.)  1051. 
Meehem  Agencv,  See.  1397. 

Ogden  vs.  Raymond,  22  Conn.  379,  385,  58  Am.  Dec.  429. 

88.  Meehem  Agency.  Sec.  1398. 
Noyes  vs.  Loring,  55  Me.  408. 

89.  Meehem  Agencv,  See.  1395. 
Weare  vs.  Gove.  44  N.  H.  196. 


§21  FORM   AND   INTERPRETATION  53 

is  everywhere  liable  upon  the  instrument,  and  though  in 
theory  this  may  not  be  correct,  the  rule  ''will"  as  a 
writer  upon  the  subject  has  said,  ''tend  to  increase  nego- 
tiability, and  in  addition  to  that  has  the  excellent  advan- 
tage of  settling  all  conflict  of  authority  upon  the  sub- 
ject." Section  69  provides  the  manner  in  which  and  to 
what  extent  an  agent  or  broker  is  liable  who  negotiates 
an  instrument  by  delivery  without  indorsement. 

Signature  by  "Sec.  21.     A  signature  by  "procura- 

procuration;  tion''  operates  as  notice  that  the  agent 

effect  of.  ^^g  g^^  ^  LIMITED  authority  to  sign,  and 

the    principal    is    bound    only    in    case    the    AGENT    IN    SO 

signing  acted  within  the  actual  limits  of  his  au- 
thority. ' ' 

In  this  section  the  technical  legal  term  "by  procura- 
tion" means,  in  or  on  behalf  of  another,  acting  under 
his  written  authority,  and  it  has  of  course,  to  do  with  the 
doctrine  of  agency.  More  definitely,  the  term  means 
one  person's  signature  attached  to  an  instrument,  not 
i]i  his  own  behalf,  and  as  his  own  act,  but  in  behalf  of 
some  other  named  person  from  whom  he  has  express 
authority  to  do  it,  usually  in  the  way  of  written  power 
of  attorne}^  and  as  whose  act  it  is  to  be  considered.  This 
form  of  signature  is  uncommon  here  and  very  infre- 
quently employed  upon  negotiable  instruments  of  the 
kind  which  are  used  in  ordinary  commercial  transac- 
tions. Where  it  is  found  it  is  usually  abbreviated  thus 
"per.  proc."  or  merely  "p.  p."  or  the  signature  is  fol- 
lowed by  the  words  "attorney  in  fact,"  when  the  agent 
is  acting  for  an  individual.  The  section  would,  however, 
seem  to  be  equally  applicable  to  corporation  officers  or 
representatives  signing  in  a  representative  capacity. 
Whenever  a  name  is  so  signed  all  persons  taking  the  in- 
strument are  by  that  fact  alone  notified  to  be  on  their 
guard,  and  to  satisfy  themselves  positively  that  the  per- 


54  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  21 

son  who  so  signs  the  instrument  is  acting  by  proper 
authorization  of  his  principal,  and  not  only  that,  but  to 
satisfy  themselves  that  he  is  acting  within  the  actual 
limits  of  the  authority  given  him  to  execute  or  indorse 
the  instrument. 

When  the  instrument  discloses  that  the  agent  signed 
per  power  of  attorney  or  formal  appointment  it  cannot 
be    shown    that    his    ostensible    authority    was    greater 
than  that  granted  in  the  written  authorization.     Par- 
ties   dealing    with    an    agent  known    by    them    to    be 
acting   under   an    express    grant,   whether   the    author- 
ity ])e  general  or  special,  are  bound  to  take  notice  of 
the  extent  of  the  authority  conferred.     They  must  be 
regarded  as  dealing  with  him  with  that  grant  before 
them,  and  are  bound,  at  their  peril,  to  notice  the  limita- 
tions thereto  prescribed  either  by  its  own  terms,  or  by 
construction  of  the  law.^^    Thus  a  signature  "per.  proc." 
or  made  by  someone  known  to  be  acting  under  formal  au- 
thorization carries  with  it  a  more  solemn  warning  to  the 
person  to  whom  it  is  offered  and  puts  upon  him  a  graver 
burden  to  inquire  into  the  authority  of  the  person  who 
uses  it  than  does  the  signature  by  one  who  is  acting  under 
some  general  authority  from  his  principal,  derived  from 
written  or  oral  authorization,  or  implied  from  an  author- 
ized course  of  dealing.    One  who  does  not  make  this  in- 
quiry when  chargeable  with  the  duty  to  do  so  must  bear 
any  loss  he  may  suffer,  if  the  agent  signing  by  procuration 
exceeds  the  actual  limits  of  his  authority.''^ 


90.  Mechem  Agency,  Sec.  707. 

Mt.  Morris  Bk.  vs.  Gorham,  169  Mass.  519. 
Fereuson  vs.  Davis,  118  N.  C  946. 

91.  Mt.  Morris  Bk.  vs.  Gorham,  169  Mass.  519. 


§22  FORM  AND   INTERPRETATION  55 

Effect  of  indorse-       "Sec.  22.     The  indorsement  or  assign- 

ment  by  infant      ment  of  the  instrument  by  a  corpora- 

or  corporation.      jios   or  by  an  infant"  passes  the  prop- 

Oarolina.         ].:kxy     therein,     notwithstanding     that 

FROM  want  of  capacity  THE  CORPORATION   OR  INFANT"  :MAY 
incur  no  liability  THEREON." 

Infants,  that  is,  persons  who  have  not  yet  attained  le- 
gal ago,  are  not  considered  in  the  law  to  have  full  capac- 
ity to  enter  into  business  obligations.  Any  business  act 
which  they  perform  while  under  legal  age,  except  one  by 
which  they  provide  themselves  with  their  necessaries,  is 
voidable  by  them  when  they  reach  full  age.  The  time  at 
which  they  attain  full  age  is  not  alike  in  all  the  States. 
But,  in  regard  to  negotiable  instruments,  while  they  can- 
not make  or  indorse  a  note,  or  accept  or  indorse  a  bill  dur- 
ing minority  which  they  could  not  repudiate  after  coming 
of  age,  unless  it  is  one  for  necessaries, — when  a  note  or 
bill  passes  through  the  hands  of  an  infant,  his  indorse- 
ment of  his  signature  upon  it  transfers  the  title  to  the  in- 
strument to  the  next  holder  and  it  may  be  negotiated  by 
him,  and  by  subsequent  holders,  as  though  the  infant  were 
under  no  disability,  and  may  be  enforced  against  all  other 
parties.  The  section  does  not  deprive  an  infant  of  his 
right  to  repudiate  acts  performed  during  his  disability 
by  minority,  including  the  act  of  passing  his  title  to  a 
negotiable  instrument  by  his  indorsement.  It  seems 
never  to  have  been  specifically  decided  that  he  has  this 
right,  but  if  he  has,  he  is  not  deprived  of  it  by  this  sec- 
tion.^- 

A  corporation  has  only  such  powers  as  are  granted 
to  it  in  its  charter  or  are  incident  or  necessary  to  the 
business  in  which  it  is  engaged.  It  cannot  be  held  for 
acts  of  its  officers  which  are  not  properly  within  the 
scope  of  its  powers,  but,  like  an  infant,  its  indorsement 


92.     Roach  vs.  Woodhall,  91  Tenn.  206. 


56  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  23 

upon  a  negotiable  instrument,  even  though  made  in  a 
transaction  not  authorized  by  its  charter,  or  not  incident 
or  necessary  to  the  conduct  of  its  business,  will,  never- 
theless, though  it  may  impose  no  liability  upon  the  cor- 
poration, operate  to  pass  the  title  to  the  next  holder  who 
may  continue  the  negotiation. 

v^^^^A  r,i ''Sec.  23.  Where  a  signature  is  forged 

Forged  signa- 
ture;   effect   of.       ^^  MADE  WITHOUT  AUTHORITY"  OF  THE  PER- 

«Illinois.  SON  whose  signature  it  purports  TO  BE, 

IT  IS  WHOLLY  INOPERATIVE,  AND  NO  RIGHT  TO  RETAIN  THE 
INSTRUMENT,  OR  TO  GIVE  A  DISCHARGE  THEREFOR,  OR  TO  EN- 
FORCE PAYMENT  THEREOF  AGAINST  ANY  PARTY  THERETO,  CAN 
BE  ACQUIRED  THROUGH  OR  UNDER  SUCH  SIGNATURE,  UNLESS 
THE  PARTY  AGAINST  WHOM  IT  IS  SOUGHT  TO  ENFORCE  SUCH 
RIGHT  IS  PRECLUDED  FROM  SETTING  UP  THE  FORGERY  OR  WANT 
OF  AUTHORITY." 

A  forged  signature  or  indorsement  does  not  create 
any  liability  on  the  part  of  the  person  whose  signature  it 
appears  to  be.  One  who  holds  an  instrument  upon  which 
any  signature  has  been  forged  and  who  has  obtained 
title  by  or  through  the  forged  signature  or  indorsement, 
has  no  right  to  retain  the  instrument,  to  receive  payment 
upon  it  or  enforce  it  against  any  party,  even  if  the  holder 
is  an  innocent  holder  for  value. ^^  If  the  person  whose  sig- 
nature is  forged  pays  the  instrument,  unless  he  does  so 
voluntarily,  knowing  its  character,  he  can  recover  the 
money  he  pays  upon  it,^^  although  this  right  is  some- 
times denied  him  when  innocent  persons  have  suffered 
loss  by  reason  of  his  mistake. 

93.  Beem  vs.  Farrell,  135  la.  670,  677. 
Hovorka  vs.  Hemma,  108  111.  A.  443. 

Stein  vs.  Empire  Trust  Co.,  148  App.  Div.  (N.  Y.)  850. 
(^amp  vs.  Caii^cnter,  52  Mich.  375. 

94.  Meyer  vs.  Rosenheim,  115  Ky.  409. 
Cobum  vs.  Neal,  94  Me.  541,  48  A.  178. 

Jones  vs.  Miners  Bk.,  144  Mo.  A.  428,  128  S.  W.  129. 
Hefner  vs.  Dawson,  63  111.  403,  14  Am.  R.  123. 
Coi-\vith  First  St.  Bk.  vs.  Williams,  143  la.  177,  121  N.  W.  702, 
136  Am.  St.  R.  759,  23  L.  R.  A.  (N.  S.)  1234  and  Note. 


§23  FORM   AND  INTERPRETATION  57 

When  the  fraud  affects  only  individual  interests  and 
is  not  a  crime"-''  he  may,  however,  be  prevented  by  some 
act  of  his  own  from  avoiding  the  instrument,  or  recover- 
ing a  payment  made  by  mistake  if  his  signature  is  forged 
or  made  without  authority.  Such  laws  as  apply  to  these 
circumstances  are  not  alike  and  are  not  interpreted  alike 
in  all  States,  and  they  must  be  examined  in  each  par- 
ticular transaction  of  this  character  in  the  State  where 
the  forged  instrument  or  signature  has  been  executed, 
or  where  it  is  sought  to  be  enforced.  When  the  doctrine 
of  estoppel  has  been  recognized  in  regard  to  forged  or 
fraudulent  instruments,  it  is  based  upon  such  conduct 
as  would  preclude  the  person  asserting  it  from  setting 
up  the  forgery  or  want  of  authority,  and  must  be  a  con- 
duct from  which  an  admission  would  be  implied  that  he 
intended  to  be  bound  l)y  the  alleged  fraudulent  misuse 
of  his  name;^^  or  the  person  to  be  charged  may  be 
estopped  by  an  express  ratification  of  his  signature. ^^ 

One  of  the  principal  applications  of  this  section  is 
to  the  payment  by  a  bank  of  checks  or  other  instruments 
upon  which  a  signature  has  been  forged  or  fraudulently 
made.  AVhen  a  bank  has  certified  a  check  to  which  the 
drawer's  name  has  been  forged,  or  which  has  been  raised, 
and  it  is  at,  or  after  certification,  in  the  hands  of  a 
holder  in  due  course  he  can  compel  its  payment.^^    And, 

95.  B.  &  L.  Assn.  vs.  Walton,  181  Pa.  St.  201. 
Sliisler  vs.  Van  Dyke,  92  Pa.  St.  447. 
Greenfield  Bk.  vs.  Crafts,  4  Allen   (Mass.)   447. 

96.  Teny  vs.  Bissell,  26  Conn.  41. 

Pettyjohn  vs.  Natl.  Exchsr.  Bk.,  101  Va.  111. 
15.  &  L.  Assn.  vs.  Walton.  181  Pa.  St.  201. 

97.  Owsley  vs.  Philips,  78  Ky.  517,  521. 

Shinew  vs.  Bowlinir  Green  1st  Nat.  Bk.,  84  Ohio  St.  497,  36 
L.  R.  A.  (N.  S.)  1006  and  Note.  Ann.  Cases.  1912  C.  587. 

98.  Espv  vs.  Bank  of  Cinti.,  18  Wall.   (U.  S.)   604. 

Adani  vs.  Mfrs.  Nat.  Bk.,  63  Misc.  (N.  Y.)  403,  404  (116  N.  Y. 

S.  595). 
Tmst  Co.  of  Am.  vs.  Hamilton  Bk.,  127  App.  Div.  (N.  Y.)  515. 


58  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  23 

again,  if  a  bank  pays  to  a  holder  in  due  course  a  check 
drawn  upon  it  to  which  the  drawer's  name  has  been 
forged  it  cannot  recover  from  him  unless  he  has  con- 
tributed to  the  forgery,  fraud,  or  deception  by  a  greater 
degree  of  negligence  than  that  of  the  paying  bank,  by 
which  I  mean  that  his  own  negligence  must  have  been 
responsible  for  the  loss.^^ 

The  rule  by  which  it  must  be  determined  whether  or 
not  recovery  may  be  had  when  an  indorsement  is  forged 
upon  an  otherwise  regular  instrument  not  payable  to 
bearer  or  made  in  fact  to  the  person  entitled  thereto^  is, 
however,  quite  different.  The  drawee  is  presumed  to 
know  the  drawer's  signature  (Sec.  62),  but  no  such  pre- 
sumption, is  applied  to  the  signature  of  the  indorser.  The 
presenter  who  receives  payment  of  an  instrument  upon 
which  an  indorsement  has  been  forged  or  made  without 
authority,  wdll  be  obliged  to  refund  the  pa^^ment  to  the 
drawee^  unless,  by  reason  of  culpable  delay  in  the  dis- 
covery and  giving  notice  of  the  fraud,  his  condition  has 
so  changed  that  to  require  him  to  do  so  would  be  unjust.^ 
Should  he  be  required  to  refund,  however,  he  may  then 
recover  from  prior  indorsers  who  indorsed  the  instru- 
ment subsequent  to  the  forgery  and  who  will  be  held  to 
their  warranties  as  is  provided  in  Sees.  65  and  66,  and 
each  of  these  may  in  turn  recover  of  his  immediate  in- 
dorser, back  to  the  time  when  the  forgery  occurred.  Prior 
parties  are  not  affected  by  the  forgery.^ 

99.     Comml.  Nat.  Bk.  vs.  First  Natl.  Bk.,  30  Md.  11. 
Woods  vs.  Colonv  Bk.,  114  Ga.  683. 
State  Bk  of  Chicago  vs.  First  Nat.  Bk.,  S7  Nebr.  351 
First  Nat.  Bk.  vs.^Nor.  Western  Nat.  Bk..  152  111.,  296,  306. 
1.     Bartlett  vs.  First  Nat.  Bk..  247  111.  490,  93  N.  E.  337. 
2.     Bartlett  vs.  First  Natl.  Bk.,  247  111.  490,  93  N.  E.  337. 

Gallo  vs.  Brooklyn  Sav.  Bk.,  119  N.  Y.  222,  92  N.  E.  633. 
Ti-ust  Co.  of  Amer.  vs.  Hamilton  Bk.,  127  App.  Div.  515,  112 
N.  Y.  S.  84. 

3.  Yatesville  Banking  Co.   vs.  Fourth  Natl.  Bk.,  10   Ga.  A.  1, 

72  S.  E.  528. 

4.  Beem  vs.  Farrell,  135  Iowa,  670. 


§23  FORM   AND   INTERPRETATION  59 

One  for  whose  account  a  bank  has  paid  or  certified 
a  forged  or  fraudulent  instrument  owes  a  duty  to  the 
bank  to  notify  it  of  the  fraud  immediately  upon  its  dis- 
covery, and  if  his  negligence  or  undue  delay  in  giving 
notice  cause  the  bank  to  lose  an  opportunity  to  indem- 
nify itself  the  loss  upon  the  instrument  will  fall  upon 
him.^ 

Still  another  distinction  exists.  When  the  presenter 
receives  ])ayment  as  the  agent  of  another  for  collection, 
he  will  be  required  to  refund,  unless  the  instrument  dis- 
closes the  name  of  his  principal,  thus  carrying  on  its 
face  notice  that  the  presenter  is  acting  merely  as  agent, 
and  he  has  actually  paid  over  the  amount  to  his  prin- 
cipal before  notice." 

If  instead  of  being  a  forgery,  the  signature  is  made 
without  authority  the  instrument  is,  likewise,  not  en- 
forceable against  the  person  whose  fraudulent  signature 
is  placed  upon  it  by  some  one  who  pretends  to  act  as  his 
agent  but  acts  without  his  authority.  Such  a  signature 
or  indorsement  does  not  convey  to  the  transferee  the 
title  of  the  instrument  or  the  right  to  receive  payment, 
and  does  not  create  any  obligations  on  the  part  of  the 
person  whose  signature  it  purports  to  be.  But  in  this 
case  also  the  person  whose  name  is  so  used  may  become 
liable  and  be  held  to  pay  the  instrument  if  he  has  done 
some  act,  or  omitted  to  perform  some  duty  in  respect  to 
the  instrument,  which  will  preclude  him  from  making 
this  defense.'^     (See  Sec.  19.) 

5.  Leather  IVHis.  Bk.  vs.  Morc:aii,  117  U.  S.  9(3. 
Traders  Natl.  Bk.  vs.  Ko-ers,  167  Mass.  315. 
States  vs.  First  Nat.  Bk.,  203  Pa.  69,  74. 

6.  Natl.  Park  Bk.  vs.  Seaboard  Bk..  114  N.  Y.  28.  20  N.  E.  612. 
Natl.  City  Bk.  vs.  Westoott.  118  N.  Y.  468,  28  N.  E.  900.  16 

Am.  S."  R.  771. 
Springs  vs.  Hanover  Natl.  Bk.,  145  App.  Div.   (N.  Y.)  188. 

7.  Terrv  vs.  Blssell,  26  Conn.  23. 
Pettvjohn  vs.  Natl.  E.  Bk.,  101  Va.  111. 
Jett  vs.  Standafer,  143  Ky.  787. 


60  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  23 

There  are  certain  other  circumstances  out  of  which  a 
puzzling  difficulty  has  sometimes  arisen  which  is  to  be 
determined  by  the  application  of  this  section.  I  refer 
to  that  situation  in  which  one  fraudulently  impersonating 
another  has  procured  a  bona  fide  instrument,  usually  a 
check,  to  be  issued  to  him  by  the  drawer  who  acts  in  the 
honest  belief  that  he  is  issuing  the  instrument  to  an  en- 
tirely different  person  with  whom  he  supposes  himself 
to  be  dealing.  When  the  instrument  which  is  so  pro- 
cured has  been  paid  by  the  bank  upon  which  it  is  drawn 
or  has  been  negotiated  to  a  holder  in  due  course,  the 
courts  have  usually  held  that  the  drawer  must  bear  the 
loss -occasioned,  notwithstanding  that  its  issue  was  ob- 
tained by  fraud  or  misrepresentation.^  Indeed,  a  deci- 
sion to  the  contrary,  rendered  since  the  passage  of  the 
Act,  has  been  very  severely  criticised  as  holding  what  the 
learned  judge  who  rendered  it  thought  the  law  ought  to 
be  rather  than  what  it  is.^  This  criticism  is,  however, 
unmerited,  for  in  Ohio,  for  example,  his  decision  would 
be  regarded  as  in  accord  -wdth  those  of  its  Supreme 
Court,^^  although  in  that  State  a  more  recent  decision  is 
in  conformity  with  the  rather  generally  accepted  view 
stated  above.^^ 

The  decisions  establishing  the  rule  as  I  have  stated 
it  above  are  usually  based  upon  the  theory  that  the  per- 
son who  issued  the  instrument  intended  that  it  should 
be  paid  to  the  one  to  whom  he  delivered  it  and  when  that 
has  been  accomplished,  they  hold  that  the  paying  bank 


8.  Anderson  vs.  Dundee  St.  Bk..  66  Hun  (N.  Y.)  613. 

9.  Tolman  vs.  Am.  Exchg.  Natl.  Bk.,  22  R  I.  462,  48  Atl.  480. 

10.  Dodge  vs.  Bank,  20  Ohio  St.  234. 
Armstrong  vs.  Pomeroy  Bk.,  46  Ohio  State  512. 

11.  McHenn^  vs.   Nat'l  Bk.,  85  Ohio   State  203,   97   N.   E.   395, 

38  L.  R.  A.  (N.  S.)  1111  and  Note. 


§23  FORM   AND   INTERPKETATJON  61 

has  carried  out  the  drawer's  intention.^ ^  And  yet 
that  is  not  altogether  correct  for,  to  arrive  at  such  a  con- 
chision,  these  courts  must  disregard  the  fact  the  imper- 
sonator was  not  actually  the  person  the  drawer  had  in 
mind  and  with  whom  he  supposed  himself  to  be  dealing 
when  he  delivered  the  instrument. 

Although  the  jjreponderance  of  opinion  is  as  I  have 
stated,  yet,  it  ought  not,  by  any  means,  to  be  regarded  as 
a  settled  doctrine  that  when  a  check  is  delivered  and 
paid  to  one  who  fraudulently  impersonates  another,  the 
drawer  must  invariably  bear  the  loss.  But  it  is  settled 
that  a  situation  is  then  presented  which  requires  the 
court  to  determine  by  w4iose"  direct  negligence  the  loss 
was  occasioned,  that  of  the  drawer  by  his  failure  to  dis- 
cover the  fraudulent  impersonation,  or  that  of  the  pay- 
ing bank,  for  its  duty  requires  it  to  see  to  it,  at  its  peril, 
that  it  pays  the  check  according  to  the  drawer 's  order  to 
the  party  to  whom,  by  its  terms,  it  is  payable.  To  be  re- 
lieved from  this  responsibility,  the  bank  must  have  made 
the  usual  inquiries  respecting  the  identity  of  the  pre- 
senter^^ and  have  used  that  degree  of  care  and  prudence 
which  its  relation  to  its  depositor  demands,  a  conclusion 
which  is  clearly  indicated  in  all  of  the  cases  cited  under 
this  section.  But  where  it  appears  that  one  of  two  inno- 
cent persons  must  suffer  loss  by  the  fraud  or  misconduct 
of  a  third,  the  loss  must  be  borne  by  that  one  of  them  who 
first  reposes  confidence  in  the  Avrongdoer  and  commits 
the  first  oversight.^* 


12.  Land   Title  &  Trust   Co.  vs.  Xoi-tlnvostern  Nat.  Bk..  196  Pa. 

230. 
State  vs.  First  Natl.  Bk.  of  Montrose.  17  Pa.  Super.  256,  AfE. 
203  Pa.  69. 

13.  Miners,  Etc..  Bk.  vs.  St.  Louis  Smeltiner  Co.   (Mo.  A.).  178 

S.  W.  211,  212. 

14      Morse,  Banks  &  Banking,  Vol.  2,  See.  474.  p.  115  and  cases. 


62  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  24 


SUBDIVISION  II, 


Consideration. 

Section  Section 

24  Presumption     of     considera-   27     When     lien     on     instrument 

tion,  constitutes     holder     for 

25  Consideration;    what    consti-  value. 

tutes.  28     Effect  of  want  of  considera- 

26  What  constitutes  holder  for  tion. 

value.  29    Liability    of    accommodation 

party. 

Unlike  any  other  simple  contract,  a  negotiable  instru- 
ment implies  a  consideration.  This  is  because  negoti- 
able instruments  are  so  important  as  a  medium  for  car- 
rying on  business.  They  take  the  place  of  actual  money, 
and  bills,  checks  and  notes  are  used  as  a  means  of  set- 
tling commercial  transactions  between  men  much  more 
frequently  and  to  a  greater  extent  than  is  actual  money. 
Having  many  of  the  attributes  of  money  they  are  safe- 
guarded in  every  way  consistent  with  their  character 
and  purpose  in  order  that  they  may  readily  pass  from 
hand  to  hand.  Therefore,  they  are  deemed  to  have  been 
issued  for  a  valuable  consideration  and  this  presump- 
tion continues  until  the  contrary  is  made  to  appear.  The 
provisions  in  the  Act  upon  the  subject  are  as  follows : 
Presumption  of  ''Sec.    24.     Every    negotiable   instru- 

consideration.  ment  is  deemed,  prima  facie,  to  have 
been  issued  for  a  valuable  consideration  :  AND  every 
person  whose  signature  appears  thereon  to  have  be- 
come   A   PARTY    thereto    FOR   VALUE." 

The  consideration  is  the  thing  of  value  which  is  given 
for  the  instrument.  It  does  not  necessarily  mean  money 
or  goods,  although  these  are  most  frequently  the  consid- 
eration for  such  instruments.  It  may  in  addition  to 
these  be  anything  of  value,  including  a  promise. 


§24  CONSIDERATION  6:j 

Consideration  is  usually  stated  to  be  either  a  thing 
given  for  a  thing,  a  thing  given  for  a  promise,  a  prom- 
ise given  for  a  thing  or  a  promise  given  for  a  promise, 
or  instead  of  a  ''thing"  there  may  be  an  act.  (Also  see 
Sec.  25.)  It  is  always  presumed,  that  is  supposed  and  • 
believed  to  be  true  without  requiring  proof,  that  a  ne- 
gotiable instrument  has  been  issued  for  a  valuable  con- 
sideration. Any  party  to  the  instrument  will  be  permit- 
ted to  show  that  this  presumption  is  not  correct  but  un- 
til he  does,  it  is  deemed,  prima  facie,  that  is,  taken  for 
granted  without  proof,  that  it  has  been  so  issued;  and 
likewise  every  person  who  has  signed  the  instrument 
in  any  capacity  is  deemed,  until  the  contrary  is  shown, 
to  have  done  so  for  value.  In  an  action  upon  the  instru- 
ment it  is  not  necessary  that  the  person  seeking  to  en- 
force it  shall  allege  and  prove  that  it  is  supported  by  a 
valuable  consideration,  or  that  all  signatures  were  placed 
upon  it  for  value. ^  The  production  of  the  instrument 
sufficiently  supports  that  presumption  in  its  favor.  The 
person  denying  consideration  must  set  up  this  plea  in 
his  answer  to  the  suit  and  must  prove  it  or  at  least  offer 
evidence  which  tends  to  prove  it,^  w^hereupon  his  proof 
must  be  met  and  overcome  by  the  person  seeking  to  en- 
force the  instrument,  who  is  aided  by  this  presumption 
in  his  favor.^  If  the  testimony  is  evenly  balanced,  the 
presumption  will  prevail.^  In  the  hands  of  any  holder, 
the  instrument  will  be  presumed  to  have  been  issued  or 

1.  First  Natl.  Bk.  vs.  Stallo,  160  App.  Div.   (N.  Y.)  702. 

2.  Hudson  vs.  Moon,  42  Utah,  377,  130  P.  774. 
Dawson  vs.  Womblos,  123  Mo.  App.  340. 

3.  Huntinui;on  vs.  Sluite,  180  Mass.  371,  02  N.  E.  380.  91  Am.  S. 

R.  309. 
Ginn  vs.  Dulan,  81  Oli.  S(.  121,  <)0  N.  E.  380,  91  Am.  S.  K.  309. 
Lombard  vs.  Byrne,  194  Mass.  236,  238. 

4.  Star  Mills  vs.  Bailcv,  140  Kv.  194.  201.  130  S.  W.  1077,  140  A. 

S.  R.  370. 


64  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  25 

negotiated  for  value  by  every  person  whose  name  ap- 
pears upon  it.  Where  the  term  "value"  is  used  in  the 
Act  it  means  a  valuable  consideration  (Sec.  191),  and 
what  constitutes  a  valuable  consideration  is  defined  in 
the  next  section. 

Consideration;  ''Sec.    25.     Value    is    any    considera- 

what  constitutes,  tion    sufficient    to    support    a    simple 

"Wisconsin.  contract.     An  antecedent  or  pre-exist- 

niinois. 

ING  DEBT  CONSTITUTES  VALUE;  AND  IS 
deemed  SUCH  WHETHER  THE  INSTRUMENT  IS  PAYABI,E  ON 
DEMAND  OR  AT  A  FUTURE  TIME. '  '"^ 

The  amount  and  kind  of  consideration  which  must  be 
given  to  support  a  promise  upon  a  negotiable  instru- 
ment is  neither  defined  nor  restricted  by  the  Act.  Any 
consideration  which  will  support  a  simple  contract  will 
be  sufficient  to  support  a  negotiable  instrument. 
*' Value"  is  by  Sec.  191  declared  to  mean  "valuable  con- 
sideration" and  this  is  understood  in  the  law  to  be  any 
benefit  to  the  promisor  of  direct  or  indirect  advantage 
gained  by  him,  or  any  loss,  detriment  or  inconvenience 
Buffered  by  promisee.-^  It  is  not  necessary  that  the  con- 
sideration should  pass  from  the  person  to  whom  the 
promise  is  given  to  the  person  who  makes  the  promise, 
it  being  quite  sufficient  if  it  passes  to  another  in  whom 
the  promisor  is  beneficially  interested.^  A  merely  nom- 
inal consideration  is,  however,  usually  insufficient  to  sup- 
port the  contract.''^ 

5.  Brooklyn  Union  Bk.  vs.  Sullivan,  214  N.  Y.  332,  108  N.  E.  558. 
Dalrymple  vs.  Wvker,  60  Ohio  State,  108,  112,  53  N.  E.  713. 
Fink  vs.  Fanners  Bank.  178  Pa.  154,  35  A.  636. 

Bingham  vs.  Kimball,  33  Ind.  184. 

6.  Brooklyn  Union  Bk.  vs.  Sullivan,  214  N.  Y.  332,  108  N.  E.  558. 
Carter  vs.  Lons:,  125  Ala.  280,  28  S.  74. 

Cobb  vs.  Heron,  180  111.  49,  54  X.  E.  189. 

Am.  Boiler  Co.  vs.  Foutham,  50  N.  Y.  Supp.  351. 

7.  Hogg  vs.  Thurman.  90  Ark.  93,  117  S.  W.  1070.  17  .\nn.  Cas. 

383  and  note. 
Proctor  vs.  Cole.  104  Ind.  373,  3  N.  E.  106,  4  N.  E.  303. 


§  25  CONSIDERATION  65 

Although  insufficiency  or  failure  of  consideration  raay 
avoid  a  contract  and  may  be  a  defense  between  imme- 
diate parties  to  a  negotiable  instrument,  it  will  never 
avoid  the  instrument  in  the  hands  of  a  holder  for  value. 
It  is  therefore  most  important,  if  a  note  or  bill  is  given 
out  by  the  maker  or  acceptor  which  is  not  given  for  a 
full  consideration,  that  is,  if  there  is  something  yet  to 
be  given  or  done  by  the  person  to  whom  it  is  delivered  or 
is  payable,  or  if  it  is  not  to  be  fully  paid  at  maturity, 
that  this  fact  be  clearly  stated  upon  the  instrument. 
(See  Sec.  28.)  And  if  an  indorser  places  his  name  upon 
the  instrument  for  any  special  purpose,  or  does  not  wish 
by  his  endorsement  to  make  himself  liable  for  the  uncon- 
ditional payment  of  the  instrument,  he  must  indicate 
that  fact  by  appropriate  words,  so  that  all  subsequent 
holders  may  be  notified  of  his  intention.     (Sec.  38.) 

An  antecedent  debt  is  declared  by  this  section  to  con- 
stitute value.  Such  a  debt  is  one  which  exists  at  the  time 
when  the  negotiable  instrument  or  indorsement  is  made, 
of  which  it  forms  the  consideration  and,  in  the  sense  in 
which  it  is  used  in  the  Act,  it  is  intended  to  distinguish 
a  debt  which  had  been  created  before  the  time  at  which 
the  instrument  or  indorsement  of  which  it  forms  the 
consideration  is  made,  even  if  it  does  not  grow  out  of 
the  same  transaction,  from  one  contracted  immediately 
at  the  time  of  the  issue  or  transfer  of  the  instrument.^ 
Thus  it  happens  frequently  that  a  bank  will  take  a  prom- 
issory'' note  in  settlement  of  an  overdraft  or,  in  a  trade 
transaction,  that  an  account,  sometimes  a  very  old  ac- 
count, one  otherwise  unenforceable,  ^v\\\  be  settled  or  ex- 
tinguished by  the  giving  or  transfer  of  a  promissory 

8.     Murchison  Nat.  Bk.  vs.  Dunn  Oil  Mills,  150  N.  C.  718. 
Israel  vs.  Gale,  174  U.  S.  391. 

Ward  vs.  City  Trust  Co.,  117  App.  Div^  (N.  Y.)  130. 
Mehlinger  vs.  Harriman,  185  Mass.  245. 


66  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  2G 

note  or  bill.  In  such  a  transaction  the  pre-existing  debt 
upon  the  overdraft  or  the  account  will  form  the  valid 
consideration  for  the  instrument  issued  or  transferred 
b}'  the  debtor  to  his  creditor  and  it  is  good. 

An  instrument  given  in  renewal  of  another  which  re- 
mains unpaid  at  maturity  may  be  said  to  be  based  upon 
such  a  consideration  and  that  it  is  good,  is  too  obvious  to 
require  further  comment  or  citation  to  authority.  If  an 
instrument  is  given  in  payment  of  or  to  secure  the  debt 
of  another,  it  is  supported  by  a  valid  consideration,  pro- 
vided the  third  person  actually  owes  the  debt''  and  the 
person  making  or  transferring  the  instrument  is  bene- 
ficially interested  in  its  payment  or  settlement. ^"^  And 
when  checks  or  other  instruments  are  exchanged  with- 
out other  consideration  the  one  forms  a  valid  consid- 
eration for  the  other.^^ 

What  constitutes  **Sec.  26.  Where  value  has  at  any 
holder  for  value,  r^j^^  been  given  for  the  instrument, 
the  holder  is  deemed  a  holder  for  value  in  respect  to 
all  parties  who  become  such  prior  to  that  time." 

The  holder  of  an  instrument  is  a  "holder  for  value"  if 
he  gives  value  or  if  value  has  been  given  for  the  instru- 
ment by  any  party  prior  to  the  time  he  became  its  holder. 
He  is  such  as  against  all  persons  who  became  parties  to 
the  instrument  before  the  negotiation  at  which  value  was 
given.  Of  course,  any  one  claiming  through  him  like^\ise 
becomes  a  holder  for  value,  as  against  persons  whose 
names  were  placed  upon  the  instrument  before  value  was 
given  for  it.  (Sec.  58.)  This  section,  therefore,  means 
that  if  an  instrument  was  issued  without  consideration 

9.  First  Nat.  Bk.  vs.  Hix  (Tex.  Civ.  App.),  164  S.  W.  1035. 

10.  Ajrricultural  Bk.  vs.  Robinson,  24  Me.  374,  41  Am.  D.  385. 

11.  Matlock  vs.  Scheucrman,  51  Or.  49. 
Miller  vs.  Marks  (Utah),  148  P.  412,  417. 
Rice  vs.  Grander,  131  N.  Y.  149. 
Franklvn  Bk.  vs.  Roberts.  168  N.  C.  473. 


§  2Z  CONSIDERATION  67 

and  passed  through  several  hands  without  value  having 
been  given  for  it,  while  it  is  not  enforceable  in  the  hands 
of  any  holder  if  value  has  never  been  given,  one  giving 
value,  or  any  one  taking  it  after  or  through  the  one  who 
gave  value  for  it,  whether  for  value  or  not,  may  en- 
force it  against  every  person  who  became  a  party  to  the 
instrument  before  the  transfer  at  which  value  was 
given. 

When  lien  on  *'Sec.   27.     Wheke  the   holder  has  a 

instrument  lien  on  the  instrument,  arising  either 

constitutes  FROM  contract  or  by  implication  of  law, 

holder  for  value. 

HE  is  deemed  a  holder  FOR  VALUE  TO   THE 

extent  of  his  lien.  ' ' 

A  lien,  in  law,  is  a  legal  claim  or  hold  on  property  as 
security  for  a  debt.  A  negotiable  instrument  is,  of 
course,  property  and  one  who  holds  it  as  collateral  se- 
curity for  a  debt  or  liability  owing  to  him,  while  not  be- 
ing its  o\\Tier,  has  a  claim  against  the  instrument  and  is 
considered  to  be  a  holder  for  value  to  the  amount  of  his 
claim.  He  can  enforce  the  instrument  for  the  payment 
of  his  claim  regardless  of  rights  and  duties  of  the  par- 
ties among  themselves  and  to  each  other,  and  even  if 
value  had  not  previously  been  given  by  any  party,  his 
lien  constitutes  value,  and  this  is  so  even  if  the  instru- 
ment was  pledged  for  an  antecedent  debt.^^    (Sec.  25.) 

The  lien  arising  by  contract  needs  no  explanation.  Its 
effect  will  be  as  expressed  in  the  contract  by  which  it  is 
created.  In  the  absence  of  an  express  contract  a  lien 
arises  by  implication  of  law  out  of  those  principles  of 
right  and  justice  w^hich  lie  at  the  bottom  of  equitable 
jurisprudence  as  applied  to  the  relations  of  the  parties 
and  the  circumstances  surrounding  their  dealings.  It  will 
arise  from  any  just  inference  that  by  reason  of  advances 
or  services,  or  other  benefit  rendered  by  one  person  to 

12.     Brewster  vs.  Schrader,  26  Misc.  (N.  Y.)  480. 


68  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  28 

another,  it  was  intended  that  a  lien  upon  the  instrument 
or  its  proceeds  in  his  possession  should  be  created.  A 
bank  advancing  money  to  any  one  dealing  with  it  is  en- 
titled to  a  lien  upon  all  of  his  securities  which  it  holds, 
and  upon  any  general  balance  in  its  possession  which 
may  belong  to  him  when  these  are  not  held  or  deposited 
for  some  distinct  other  purpose,  or  affected  by  some  par- 
ticular agreement  inconsistent  with  this  right. ^^. 
Effect  of  want  of  ''Sec.  28.  Absence  or  failure  of  con- 
consideration.         sideration    is    a    matter    of    defense    as 

AGAINST  ANY  PERSON  NOT  A  HOLDER  IN  DUE  COURSE:  AND 
PARTIAL  FAILURE  OF  CONSIDERATION  IS  A  DEFENSE  PRO  TANTO, 
WHETHER  THE  FAILURE  IS  AN  ASCERTAINED  AND  LIQUIDATED 
AMOUNT   OR   OTHERWISE.'' 

If  no  consideration  whatever  was  given  for  the  in- 
strument, or  if  the  consideration  given  was  represented 
to  be  valuable  at  the  time  the  instrument  Avas  made  or 
transferred,  but  afterward  proved  to  be  substantially 
different  and  of  less  value  than  represented,^^  or  if  it 
should  appear  that  an  agreement  upon  which  the  instru- 
ment was  based  was  not  carried  out,^^  or  if  the  consid- 
eration for  which  the  instrument  was  issued  was  not 
given,^^  or  for  any  other  reason  there  is  a  total  absence 
or  failure  of  consideration,  the  person  aifected  bj^  the 
failure  of  consideration  may  set  this  up  as  a  matter  of 
defense  against  any  party  not  a  holder  in  due  course  in 
an  action  upon  the  instrument  and  avoid  its  pajnnent. 
And  if  there  is  a  partial  absence  or  failure  of  considera- 
tion he  may  set  it  up  and  be  relieved  ''pro  ianto,"  mean- 

13.  Knapp  vs.  Cowell,  77  Iowa,  528.  42  N.  W.  434. 
Morse  Banks  &  Banking,  Sec.  324. 

Talapoosa  Co.  Bk.  vs.  Wynn,  173  Ala.  272,  55  So.  1011. 
Commonwealth  vs.  Wathen,  126  Ky.  573,  104  S.  W.  364. 

14.  Shoe,  Etc.,  Natl.  Bk.  vs.  Wood,  142  Mass.  563,  8  N.  E.  753. 
Ferguson  vs.  Netter,  141  App.  Div.  (N.  Y.)  274. 

15.  Brenneman  vs.  Fumiss,  90  Pa.  St.  186. 

16.  Agnew  vs.  Walden,  84  Ala.  502,  4  S.  672. 


§  29  CONSIDERATION  69 

ing,  for  as  much  of  the  consideration  as  is  absent  or  has 
failed.  The  partial  absence  or  failure  of  consideration 
need  not  be  ascertained  and  liquidated,  which  means 
known  and  positively  determined,  but,  of  course,  it  must 
be  determinable.  Neither  of  these  defenses  can,  however, 
be  used  to  defeat  the  instrument  if  it  is  in  the  hands  of  a 
holder  in  due  course,  nor  do  they  affect  the  negotiability 
of  the  instrument.^'  It  must  be  paid  to  such  a  holder  re- 
gardless of  the  total  or  partial  absence  or  failure  of  the 
consideration. 
Liability  of  "8ec.    29.      An    accommodatiox    party 

accommodation        is     ONE      WHO      HAS      SIGNED      THE      IxVSTRU- 
^'i^y^y*.  MKXT    AS   MAKER,   DRAWKR,   ACCEPTOR,    OR  IN- 

«Illinois.  « 

DOBSEB,*'  WITHOUT  EECEIVING  VALUE  THERE- 
FOR, AND  FOR  THE  PURPOSE  OF  LENDING  HIS  NAME  TO  SOME 
OTHER  PERSON.  SuCH  A  PERSON  IS  LIABLE  ON  THE  INSTRU- 
MENT TO  A  HOLDER  FOR  VALUE,  NOTWITHSTANDING  SUCH 
HOLDER  AT  THE  TIME  OF  TAKING  THE  INSTRUMENT  KNEW 
HIM  TO  BE   ONLY  AN  ACCOMMODATION  PARTY.'"* 

One  who,  for  the  benefit  of  another,  signs  his  name  to 
a  negotiable  instrument  in  any  capacity  mentioned  in 
this  section,  and  who  receives  nothing  of  value  for  or 
from  the  instrument,  becomes  an  accommodation  party.^^ 
Such  a  person  will  be  deemed  an  accommodation  party 
even  if  he  is  paid  for  the  use  of  his  name.^"-'  He  has 
loaned  his  name  and  credit  to  the  instrument  to  accom- 
modate, that  is,  to  aid  some  other  persons  and  he  may  do 
so  either  as  maker,  drawer,  acceptor  or  indorser.  (See 
also  Sec.  64.)  In  whatever  capacity  he  may  have  become 
an  accommodation  party  he  is  liable  to  any  holder  who 
has  given  value  for  the  instrument  even  if  that  holder 
knew  at  the  time  of  taking  it  that  the  maker,  drawer,  ac- 


17.     Dingman  vs.  Amsink,  77  Pa.  St.  114. 

IS.     Grcenwav  vs.  Wm.  D.  Orthwein  Grain  Co.,  85  Fed.  536. 

Yoiuiu'  vs.  Exchi-.  Bk.,  152  Ky.  293,  153  S.  W.  444,  Ann.  Cas. 
1915,  B.  148.  " 
19.     Morris  County  Brick  Co.  vs.  Austin.  79  N.  J.  L.  273,  75  A.  550. 


70  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  29 

ceptor,  or  indorser  placed  his  name  upon  the  instrument 
as  an  accommodation  party.  But  an  accommodation 
party  is  liable  upon  the  accommodation  instrument  to 
no  person  or  party  other  than  a  holder  for  value.  (See 
Sees.  26  and  27  for  what  constitutes  holder  for  value.) 

While  this  section  fixes  the  liability  of  accommodation 
parties  to  the  holder  of  the  instrument,  it  is  pertinent  to 
say  something,  at  this  place,  about  the  liability  of  accom- 
modation parties  to  each  other.  In  every  case  they  are 
liable  in  the  manner  in  which  they  agreed  among  them- 
selves to  be  bound  upon  the  instrument,  or  have  among 
themselves  an  understanding  amounting  to  an  agree- 
ment.^" If  the  accommodation  parties  are  indorsers 
their  liability,  in  the  absence  of  an  express  agreement 
to  the  contrary,  and  unless  they  are  joint  indorsers,  is 
in  the  order  in  which  their  names  appear  upon  the  in- 
strument. They  are  liable  in  the  successive  order  in 
which  they  indorsed  and  the  doctrine  of  contribution 
does  not  apply.-^  Thus  all  are  liable  to  the  last,  each  is 
liable  to  those  who  signed  after  him  and  the  first  is  liable 
to  them  all.  (See  Sec.  68.)  The  section  is  not  applic- 
able to  corporations,  which,  as  a  rule,  have  not  the  power 
to  execute  accommodation  paper.^^  The  power  to  exe- 
cute acceptances  based  upon  the  import  and  export  of 
goods,  newly  created  by  the  Federal  Reserve  Bank  Act, 
will  be  explained  in  the  introduction  to  Title  II. 

20.  Law  vs.  Stewart,  15  Fed.  Cas.  No.  8130,  3  Cranch.  (C.  C.)  411. 
Noble  vs.  Beeman  S.  &  Co..  65  Oregon  93 ;  131  Pac.  1006 ; 

46  L.  R.  A.  (N.  S.)  162. 

21.  In  re  MeCord,  174  Fed.  72,  75. 
MeCune  vs.  Belt,  45  Mo.  174,  178. 
Barnet  vs.  Youno-.  29  Ohio  St.  7. 

Porter  vs.  Hnic.  04  Ark.  333,  335;  126  S.  W.  1069,  28  L.  R. 
A.  (N.  S.)  1039. 

22.  Jacobus  vs.  Jamestown  Mantel  Co.,  211  N.  Y.  154. 
Owen  &  Co.  vs.  Storms,  78  N.  J.  L.  154. 


§  30  NEGOTIATION  71 


SUBDIVISION  III 


Negotiation. 

Section  Section 

30  What  constitutes  negotiation.    42     Effect      of      an      instrument 

31  Indorsement ;    how   made.  drawn  or  indorsed  to  a  i)er- 

32  Indorsement  must  be  of  en-  son  as  cashier,  etc. 

tire  instrument.  43     Indorsement   where    name    is 

33  Kinds  of  indorsement.  misspelled,  etc. 

34  Special  indorsement  —  in-    44     Indorsement     in     representa- 

dorsement  in  blank.  five  capacity. 

35  Blank    indorsement    changed    45     Time    of    indorsement;    i)re- 

to  special  indorsement.  sumption  as  to. 

36  When     iudoi-sement     restric-    46     Place    of    indorsement;    pre- 

tive.  sumption  as  to. 

37  Effect  of  resti-icting  indorse-    47     Continuation     of     negotiable 

ment;  rights  of  indorsee.  character. 

38  Qualified  indorsement.  48     Striking  out  indorsement. 

39  Conditional   indorsement.  49     Transfer      without     indorse- 

40  Indorsement     of     instrument  ment;  effect  of. 

payable  to  bearer.  50     When  prior  party  may  ncgo- 

41  Indorsement    where    payable  tiate  instioiment. 

to  two  or  more  persons. 

What  constitutes  "Sec.  30.  Ax  instrument  is  negoti- 
negotiation.  ated   when   it  is  transferred  from  one 

PERSON  to  another  IN  SUCH  MANNER  AS  TO  CONSTITUTE 
THE  TRANSFEREE  THE  HOLDER  THEREOF.  If  PAYABLE  TO 
BEARER,     IT     IS     NEGOTIATED     BY     DELIVERY;      IF     PAYABLE     TO 

ORDER     IT     IS     NEGOTIATED     BY     THE     INDORSEMENT     OF     THE 

HOLDER   COMPLETED  BY  DELIVERY." 

To  negotiate  the  instrument  means  to  issue  it  or  trans- 
fer it  after  it  has  been  issued,  and  by  this  section  it  is 
provided  that  to  constitute  a  negotiation,  the  issue  or 
transfer  must  have  been  made  in  such  a  manner  as  to 
make  the  transferee  the  holder  of  the  instrument.^  One 
becomes  the  holder  of  an  instrument  by  the  fact  alone 
that  it  has  been  given  into  his  possession  by  indorse- 


Bank  of  Commerce  vp.  Farmers  &  Merch.  Bk..  87  Nebr.  841,  843. 
Aurora  St.  Bk.  vs.  Hayes,  Eames  El.  Co.,  88  Nebr.  187. 
Scotland  Co.  Bk.  vs.  Hohn,  146  Mo.  App.  699. 


72  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  31 

ment  and  delivery,  or  delivery  alone  at  its  incep- 
tion, or  when  indorsement  is  not  required.  The 
delivery  must  be  made  for  the  purpose  of  giving  the  in- 
strument, together  with  all  its  incidents  into  the  right- 
ful possession  of  the  transferee  (Sec.  15  and  Sec.  191), 
either  as  owner  or  as  the  authorized  representative  of 
its  owTier,  or  in  order  to  secure  a  debt  or  liability  omng 
to  him.  In  the  latter  case  he  is  more  than  the  represen- 
tative of  its  o^vner.  He  has  an  interest  in  the  instru- 
ment to  the  amount  of  his  lien  (see  Sec.  27).  A  transfer 
which  does  not  meet  these  requirements  is  not 
a  negotiation,  does  not  pass  the  title  to  the 
instrument,  and  does  not  constitute  the  person  who 
has  taken  the  instrument  without  these  qualifications 
a  holder  within  the  meaning  of  this  Act.  If  the 
instrument  is  payable  to  bearer,  the  mere  delivery  by 
one  holder  to  another  without  indorsement  constitutes 
its  negotiation.  If  it  is  payable  to  order  the  holder  must 
write  his  name  upon  the  back  of  instrument  thereby  in- 
dorsing it,  and  he  must  complete  the  negotiation  by  de- 
livery. How  the  indorsement  must  be  made  is  pre- 
scribed by  the  next  section. 

If  a  holder  in  possession  of  the  instrument  has  in- 
dorsed it  but  does  not  complete  the  negotiation  by  deliv- 
ery, he  may  erase  his  name ;  and  if  an  instrument  is  found 
in  the  hands  of  one  who  had  made  an  indorsement  upon  it 
which,  if  accompanied  by  delivery,  would  have  amounted 
to  a  negotiation,  it  vnll  be  presumed  that  the  ne- 
gotiation was  never  completed.^ 

Indorsement;  *'Sec.  31.  The  indorsement  must  be 
how  made.  written  on  the  instrument  itsei^f,  or 
"Illinois.  UPON  a  paper  attached  thereto.  The 
signature  of  the  indorser,  without  additional  words, 
IS  A  sufficient  indorsement."''         

2.     Richards  vs.  Darst,  51  111.  140. 

McCormick  vs.  Eckland,  11  Ind.  293. 


§32  NEGOTIATION  78 

The  place  for  an  indorser's  signature  is  upon  the  back 
of  the  instrument.  If  there  is  no  room  there  a  piece  of 
paper  may  be  securely  attached  to  it  and  the  indorse- 
ment made  upon  that.  This  is  called  an  "allonge.'"  It 
may  be  made  upon  the  face  of  the  instrument,  but  if  a 
signature  is  placed  there  the  indorser  must  use  words  at 
his  signature  which  clearly  manifest  his  intention  to 
transfer  the  instrument,''  otherwise  he  msLj  be  mistaken 
for  and  hold  to  be  liable  upon  the  instrument  as  a  pri- 
mary party.  The  rights  of  the  primary  parties,  as  the 
maker  of  a  promissory  note,  and  an  indorser  are  very 
different,  as  is  their  liability  upon  the  instruments  they 
sign,  and  too  great  care  cannot  be  exercised  to  distin- 
guish plainly  the  manner  in  which  one  who  signs  the  in- 
strument elsewhere  than  upon  its  back  or  an  attached 
piece  of  paper,  intends  to  be  bound  by  his  signature.  One 
who  intends  to  assume  no  greater  liability  than  as  in- 
dorser or  does  not  intend  to  limit  his  liability  as  such, 
need  only  write  or  stamp  his  name  upon  the  back  of  the 
instrument  or  an  attached  paper  to  become  an  indorser 
within  the  meaning  of  this  Act,  the  contract  of  indorse- 
ment being  as  fully  expressed  by  the  signature  alone 
as  it  would  be  if  it  had  been  written  out  in  full  upon  the 
instrument. 

Indorsement  ''Sec.  32.     The  indorsement  must  be 

must  be  of  entire  j^-^  indorsement  of  the  entire  instru- 
instrument.  ment.     An  indorsement,  which  purports 

to  transfer  to  the  indorsee  a  part  only  of  the  amount 
payable,  or  which  purports  to  transfer  the  instrument 
TO  two  or  more  indorsees  severally,  does  not  operate 
as  a  negotiation  of  the  instrument.  But  where  the 
instrument  has  been  paid  in  part,  it  may  be  indorsed 

AS  TO  THE  residue.  ' ' 

3.     Farmers  Trust  Co.  vs.   Schenuit,  83  111.  A.  267. 
Walton  vs.  Williams,  44  Ala.  347 : 
Perry  vs.  Bray,  68  Ga.  293. 
Com.  vs.  Biitterick.  100  Mass.  12. 


74  THE  NEGOTIABLE  INSTRUMENTS  LAW    §  33,  34 

The  holder  of  a  negotiable  instrument  cannot  transfer 
a  part  only  of  it  by  indorsement.  If  he  attempts  to  do  so, 
or  if  he  attempts  to  transfer  the  whole  instrument  by 
making  part  payable  to  one  person  and  part  to  another, 
in  order  that  each  may  own  and  have  a  right  to  receive  a 
separate  part  of  the  amount  due,  this  will  not  operate  as 
a  negotiation  and  has  been  held  to  destroy  the  negoti- 
ability of  the  instrument.^  Such  an  indorsement  will 
only  operate  to  enable  the  persons  to  whom  the  indorser 
so  transfers  the  instrument  to  hold  it  as  security  for  the 
amounts  they  are  to  receive  out  of  its  payment  but  it 
does  not  constitute  either  of  them  a  ''holder"  within  the 
meaning  of  this  Act.  The  indorsement,  to  amount  to  a 
negotiation,  must  be  of  the  entire  instrument.-^  But  if 
there  has  been  partial  payment  made,  the  instrument 
may  be  indorsed  as  to  the  balance  remaining  due  and 
this  would  be  an  entire  and  complete  indorsement  and 
negotiation  if  followed  by  delivery. 

Kinds  of  "Sec.    33.      An    indoksbment    may   be 

indorsement.  either  special  or  in  blank;  and  it  may 

also  be  either  restrictive  or  qualified,  or  conditional.'' 
Two  kinds  of  indorsement  are  named  in  this  Act,  a 
special  indorsement,  which  is  defined  in  Sec.  34,  and  an 
indorsement  in  blank  which  is  defined  in  Sees.  34  and  35. 
These  indorsements  may  be  either  restrictive,  as  is  ex- 
plained in  Sees.  36  and  37,  qualified,  as  defined  in  Sec. 
38,  or  conditional,  as  explained  in  Sec.  39.  Each  has  its 
distinct  effect  upon  the  instrument  and  serves  a  partic- 
ular purpose.  > 
Special  indorse-  "Sec.  34.  A  special  indorsement 
ment;  indorse-  specifies  the  person  to  whom,  or  to 
ment  in  blank.  whose  order,  the  instrument  is  to  be" 
"Wyoming.             payable,-  and  the  indorsement  of  such 

4.  Goldman  vs.  Blum,  58  Tex.  630. 
Lind-av  vs.  Price.  33  Tex.  280,  282. 

5.  Barkley  vs.  Muller.  164  App.  Div.  381,  149  N.  Y.  S.  620. 
Erwin  vs.  Lynn,  16  Oh.  St.  539. 


§34  NEGOTIATION  75 

INDORSEE  IS  NECESSARY  TO  THE  FURTHER  NEGOTIATION  OF 
THE  INSTRUMENT,  An  INDORSEMENT  IN  BLANK  SPECIFIES 
NO  INDORSEE,  AND  AN  INSTRUMENT  SO  INDORSED  IS  PAYABLE 
TO  BEARER,  AND  MAY  BE  NEGOTIATED  BY  DELIVERY." 

The  special  indorsement,  sometimes  called  a  ''full  in- 
dorsement" is  an  order,  written  on  the  instrument  over 
his  signature  by  the  indorser,  directing  it  to  be  paid  to  a 
person  whom  he  names,  or  to  his  order.  It  is  not  neces- 
sary that  the  words  ' '  or  order ' '  be  used  in  order  to  con- 
stitute the  person  named  in  a  special  indorsement  a  ''full 
indorsee,"  qnd  unless  words  are  used  prohibiting  further 
negotiation  he  will  take  the  instrument  with  all  its  inci- 
dents including  full  negotiability  and  may  transfer  it 
to  another  by  indorsement.^  But  it  is  necessary  that 
the  person  to  whom  the  instrument  is  to  be  transferred 
by  the  indorsement  shall  be  named  in  it.  If  he  is  not 
designated,  the  indorsement  is  not  special,  although  it 
may  have  been  written  thus:     "Pay  to  the  order  of 

"^    When  a  special  indorsement  is  used 

the  instrument  is  payable  to  the  person  named  in  the  in- 
dorsement or  some  one  to  be  named  by  him.  If  he  de- 
sires the  instrument  to  be  paid  to  another  he  must  him- 
self indorse  it  or  authorize  some  one  to  do  so  for  him, 
unless  the  instrument  is,  upon  its  face,  payable  to  the 
bearer  (Sec.  40),  whereupon  he  becomes  a  party  to  the 
instrument  in  the  capacity  of  indorser. 

An  indorsement  in  blank  differs  from  this.  This  in- 
dorsement is  made  by  the  holder  by  merely  writing  his 
name  upon  the  instrument  mthout  designating  anyone 
to  whom  he  desires  it  to  be  paid.  By  that  act  he  assumes 
the  same  liability  as  by  special  indorsement  (See  Sec. 
66),  but  if  the  instrument  is  one  originally  payable  to 

6.  Fawcott  vs.  Natl.  L.  Ins.  Co.,  97  111.  11,  37  Am.  R.  95. 
Hodj^es  vs.  Adams.  19  Vt.  74,  46  Am.  D.  181. 

7.  State  vs.  Hinton,  56  Ore.  428,  109  Pac.  24. 
Adams  vs.  Smith,  35  Me.  324. 


76  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  35 

order  it  then  becomes  payable  to  bearer  and  may  be 
negotiated  by  delivery  from  one  subsequent  holder  to 
another  wdthout  indorsement,  until  it  again  becomes 
specially  indorsed. 

Since  only  those  persons  whose  names  appear  upon 
the  instrument  are  liable  upon  it  (Sec.  18),  it  is  desirable, 
by  reason  of  the  additional  security  which  will  be  given 
to  the  instrument,  that  the  transferee,  that  is  the  person 
who  is  taking  it,  require  the  person  who  is  transferring 
it  to  him  to  indorse  the  instrument.  Section  49  of  the 
Act  gives  to  the  holder  the  right  to  require  the  indorse- 
ment of  his  transferrer  if  the  instrument  is  one  payable 
to  order.  One  who  transfers  an  instrument  by  mere  de- 
livery incurs  no  liability  except  to  the  extent  of  the  war- 
ranties which  by  Sec.  65  are  implied  from  a  negotiation 
by  delivery. 

gj^jj^  '^Sec.  35.    The  holder  may  convert  a 

indorsement  blank    indorsement    into    a   special   in- 

changed  to  dorsement   by   writing   over  the   signa- 

special  ture  of  the    indorser  in  blank  any  con- 

indorsement.  tract  consistent  with  the  character  of 

THE  indorsement." 

If  an  indorser  has  made  a  blank  indorsement  (Sec.  34) 
upon  the  instrument,  whoever  has  it  as  holder,  may  write 
over  the  signature  of  the  indorser  in  blank  the  name  of 
any  person  to  whom,  or  to  whose  order,  he  desires  the 
instrument  to  be  paid.  He  then  need  not  indorse  it  him- 
self but  by  this  act,  followed  by  delivery,  he  will  have 
transferred  the  instrument  to  the  person  he  has  named 
without  making  himself  a  party  to  the  transfer^  and, 
unless  the  instrument  was  originally  payable  to  bearer, 
he  thereby  changes  its  character  from  one  payable  to 
bearer  to  an  instrument  payable  to  order.  (See  Sec.  40.) 
In  accomplishing  this  the  holder  may  write  over  the 

8.     Evans  vs.  Gee,  31  Pot.  (U.  S.)   78.  S3. 


§  36  NEGOTIATION 


/ 1 


blank  indorsement  any  words  consistent  with  the  charac- 
ter of  the  indorsement  and  which  express  the  real  agree- 
ment of  the  blank  indorser,  but  he  may  not  write  any 
words  that  will  change  the  character  of  the  indorser 's 
liability  or  impair  or  take  away  any  of  his  legal  rights 
or  defenses.^  It  has  also  been  held,  however,  that  if  the 
words  written  over  the  blank  indorsement  are  made  to 
express  a  contract  different  from  that  which  was  in- 
tended, it  may  be  reformed.^" 

When  ' '  Sec.  36.    An  indoksement  is  restrict- 

indorsement  -j^e  which  either — 

restrictive.  -^     Prohibits  the  further  negotiation 

or  the  instrument;  or 

2.  Constitutes  the  indorsee  the  agent  of  the  in- 
dorser, OR 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or 
TO  the  use  of  some  other  person. 

But  the  mere  absence  of  words  implying  power  to 
negotiate  does  not  make  an  indorsement  restrictive." 

A  restrictive  indorsement  is  one  which  forbids  the 
further  negotiation  of  the  instrument  or  restricts  the 
manner  of  its  tranfer.  One  form  of  this  indorsement  is 
accomplished  by  the  indorser  by  Avriting  over  his  signa- 
ture words  which  direct  pajTnent  to  a  person  named  and 
to  him  only.  The  person  named  has  then  no  right  to 
negotiate  the  instrument  further  and  no  other  person 
will  be  entitled  to  receive  pa^Tnent  upon  it.  Such  an  in- 
dorsement implies  a  promise  by  the  indorser  that  he  will 
pay  the  instrument  if  the  maker  or  acceptor  does  not  and 
if  he  is  called  upon  to  do  so,  but  that  he  w^ill  be  liable 
and  will  pay  it  only  to  the  person  named  in  his  indorse- 
ment. 

9.  roltimhia  Finnnoe  Co.  vs.  Pnrcell,  140  Fed.  85. 
Hood  vs.  bobbins.  OS  Ala.  484,  13  S.  574. 
Jordan  vs.  Lonsr,  100  Ala.  414.  19  S.  447. 

10.  Newton  vs.  Bramlett,  55  111.  A.  661. 

Sylvester  vs.  Downer,  20  Yt.  355,  49  Am.  D.  786. 


78  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  36 

The  most  common  use  of  the  restrictive  indorsement 
however,  and  the  one  chiefly  contemplated  by  the  con- 
vention which  framed  the  Act,  is  that  which  makes  im- 
possible the  further  negotiation  of  instruments  indorsed 
for  collection.  If  an  indorser  writes  over  his  signature 
an  order  to  pay  the  instrument  to  some  person  whom 
he  names  as  his  agent  as,  for  example,  if  he  indorses  the 
instrument  to  a  bank  for  collection  and  credit  to  his  ac- 
count, such  an  indorsement  indicates  that  the  person  or 
bank  taking  the  instrument  through  it  does  so  in  the 
name  of  and  acting  on  behalf  of  the  restrictive  indor- 
ser who  does  not  intend  to  part  with  his  title  to  the  in- 
strument.^^ Under  this  form  of  indorsement  the  o"svner 
of  the  instrument  will  be  able  to  control  it  or  its  pro- 
ceeds until  it  is  returned  to  him  or  paid  and  may  inter- 
cept the  proceeds  in  the  hands  of  an  intermediate  agent.^^ 
This  form  of  restrictive  indorsement  does  not  entirely 
destro}'  the  negotiable  character  of  the  instrument,  but 
affects  it  in  the  manner  described  in  Sec.  37. 

An  indorsement  which  names  one  person  to  take  the 
title  in  trust  for  another  or  for  another's  use  or  benefit, 
is  likewise  restrictive  and  it,  likewise,  does  not  entirely 
destroy  the  further  transferability  of  the  instrument. 
In  each  form  proper  language  must  be  used  to  show  that 
the  indorsement  is  restrictive,  for  the  fact  alone  that  an 
indorser  omits  words  which  give  to  or  imply  in  the  in- 
dorsee the  power  to  negotiate  the  instrument  further, 
does  not  make  it  so.    Thus,  if  the  indorsement  is  special 


11.  Chicago  First  Nat.  Bk.  vs.  Reno  County  Bk.,  3  Fed.  257. 
Butchers  &  Drovers  Bk.  vs.  Hubbell,  117  N.  Y.  384. 
Freeman's  Bk.  vs.  Natl.  Tube  Wks.,  151  Mass.  413. 

12.  Bank  of  America  vs.  Waydell,  187  N,  Y.  115.    Where  indorse- 

ment in  blank  accompanied  by  letter  stating  draft  had  been 

sent  for  collection. 
Manufacturers  Natl.  Bk.  vs.  Continental  Bk.,  148  Mass.  553. 
First  Natl.  Bk.  vs.  First  Natl.  Bk.,  76  Ind.  561. 


§37  NEGOTIATION  79 

aud  the  words  "or  order"  are  omitted  the  indorsee  may 
nevertheless  negotiate  the  instrument.  (See  Sees.  34 
and  47.) 

„^   ^    .  "Sec.  37.     A  restrictive  indorsement 

Effect  of 

restricting  confers  upon  the  indorsee  the  right — 

indorsement;  1-     To  Receive  payment  of  the  instru- 

rights  of  ment; 

indorsee.  2.     To  bring  any  action  thereon  that 

"Illinois.  ^jjj,    jjjDORSER    COULD   BRING." 

3.  To  transfer  HIS  RIGHTS  AS  SUCH  INDORSEE/  WHERE 
THE   form  OF  THE  INDORSEMENT  AUTHORIZES  HIM  TO  DO  SO. 

But  all  subsequent  indorsees  acquire  only  the  title 
of  the  first  indorsee  under  the  restrictive  indorse- 
MENT."* 

The  indorsee  who  holds  under  a  restrictive  indorse- 
ment has  the  right  to  receive  payment  of  the  instrument 
and  consequently  has  the  right  to  compel  its  paj'"ment, 
and  a  discharge  given  by  him  for  payment  will  be  good. 
He  has  the  right  to  bring  any  action  upon  the  instrument 
which  the  indorser  w^ho  made  the  restrictive  indorse- 
ment might  bring  and  he  can  transfer  his  rights  as  such 
indorsee  unless  the  form  of  the  instrument  or  the  re- 
strictive indorsement  prohibits  it.^^  But,  while  he  can 
transfer  such  rights  as  are  given  him  by  the  indorse- 
ment, all  indorsees  coming  after  him  take  from  and 
through  him  only  such  title  in  the  instrument  and  its  pro- 
ceeds as  he  acquired  under  the  restrictive  indorsement 
and  the  form  of  the  indorsement  by  which  the  instru- 
ment was  transferred  to  him  is  notice  to  all  subsequent 
indorsees  of  the  limited  right  of  the  restrictive  indorsee 
to  negotiate  the  instrument.  One  who  receives  an  in- 
strument indorsed  to  him  for  collection  has  therefore  no 


13.     Smith  vs.  Bayer,  4(5  Ore.  143. 
Schmidt  vs.  Fcgg,  172  Midi.  160. 
Craig  vs.  Palo  Alto  Stock  Farm,  10  Idaho,  701. 
Gleason  vs.  Thayer,  87  Conn.  248. 


80  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  38 

power  to  sell  it  and  cannot  convey  a  good  title  if  he 
does.^* 

Sub-section  2,  it  has  been  said,  is  unjust  in  that  if  a 
person  talking  the  instrument  in  trust  for  another  under 
that  form  of  restrictive  indorsement  does  so  for  value, 
he  does  not  secure  the  right  to  bring  an  action  upon  it 
against  his  immediate  indorser.  However,  since  his  in- 
dorser  had  the  right  to  bring  an  action  against  all  per- 
sons who  preceded  him  upon  the  instrument  and  trans- 
ferred this  right  to  his  transferee,  he  must  be  regarded 
as  having  thereby  included  himself  as  one  against  whom 
the  holder  by  restrictive  indorsement  may  bring  an  ac- 
tion to  enforce  the  instrument  if  he  fails  to  qualify  his 
indorsement,  since  by  no  other  form  of  indorsement  can 
he  make  himself  a  mere  assignor  of  the  title,  as  ^^dll 
be  seen  from  the  following  section. 

Qualified  "Sec.    38.     A  qualified   indorsement 

indorsement.  constitutes  the  indorsee  a  mere  assignob 

OF  THE  TITLE  TO  THE  INSTRUMENT.  It  MAY  BE  MADE  BY 
ADDING  TO  THE  INDORSER 's  SIGNATURE  THE  WORDS  '' WITH- 
OUT recourse/'  or  any  WORDS  OF  SIMIL.AR  IMPORT.  SuCH 
AN  INDORSEMENT  DOES  NOT  IMPAIR  THE  NEGOTIABLE  CHAB- 
ACTER  OF  THE  INSTRUMENT." 

When  a  person  indorses  a  negotiable  instrument  and 
writes  over  or  under,  before  or  after  his  signature  the 
words  ''\sithout  recourse"  or  "without  recourse  on  me" 
he  makes  what  is  called  a  qualified  indorsement.  He  is 
not  required  to  use  these  words  but  may  use  others 
which  mean  the  same  thing  or  have  the  same  effect.  Or 
he  may,  if  he  chooses,  write  over  his  signature  words  of 
any  qualification  or  limitation  that  he  may  wish  to  im- 
pose, and  his  liability  to  subsequent  holders  will  be  no 
greater  or  less  than  that  which  he  assumes  or  to  which 

14     Peoples  &  Drovers  Bk.  vs.  Crais:.  63  Oh.  St.  374,  59  N.  E.  102, 
81  Am.  S.  Kep.  639,  52  L.  R.  A.  872. 


§  39  NEGOTIATION  81 

he  limits  himself  by  his  words  of  qualification.^^'  These 
must  be  words  which  clearly  indicate  that  he  intends 
to  limit  his  liability.    He  may  also  qualify  his  liability 
by  enlarging  its  limits,  as  he  does  when  he  adds  a  waiver 
of  the  usual  requirements  of  demand  and  notice  of  non- 
payment.^^      (See    Sees.    5,    82,    109,    110.)     The    place 
where  the  qualification  is  written  upon  the  instrument  is 
not  of  importance  and  it  will  operate  if  it  can  be  clearly 
identified  w4th  the  indorser's  signature.^^  Each  indorser 
must  himself  write  the  qualifying  words  at  his  o^\^l  sig- 
nature in  order  that  there  can  be  no  doubt  of  their  ap- 
plication to  him.    When  one  indorser  has  qualified  his 
signature,  subsequent  indorsers  placing  theirs  under  his 
cannot  claim  that  they  signed  the  instrument  subject  to 
the  same  qualification,  unless  when  signing  they  clearly 
indicate  their  intention  to  do  so  by  appropriate  words. ^'^ 
A  qualified  indorsement  upon  the  instrument  does  not 
interfere  w^ith  its  negotiation.    The  indorser  who  limits 
his  indorsement  by  the  qualifying  words  'S\dthout  re- 
course" merely  transfers  the  title  to  the  instrument  as 
it  w^as  when  it  came  to  him,  and  he  does  not  become  liable 
to  his  transferee,  or  any  subsequent  holder,  except  to 
the  extent  of  the  w^arranties  \Yhich  by  Section  65  are  im- 
plied from  this  form  of  indorsement.     (See  Sec.  65.) 
Conditional  "Sec.  39.     Where  an  indorsement  is 

indorsement.  conditional,  a  party  required  to  pay  the 

INSTRUMENT  MAY  DISREGARD  THE  CONDITION  AND  MAKE  PAY- 
MENT TO  THE  INDORSEE   OR  HIS  TRANSFEREE,   WHETHER  THE 

15.  Fassin  vs.  Hubbard.  55  N.  Y.  465,  470. 
Markley  vs.  Corey,  108  Mich.  184. 

16.  Allen  vs.  Ri^htmire,  20  Johns,  365,  11  Am.  D.  2SS. 
Hatcher  vs.  Chambersburo-  Bank,  79  Ga.  542,  o  S.  E.  109. 

17.  Doom  vs.  Shei-win,  20  Colo.  2.34,  38  P.  56. 
Fitchbur^r  Bk.  vs.  Greenwood,  2  Allen  (Mass.)  434. 
Corbett  vs.  Fetzer,  47  Nebr.  269,  66  N.  W.  417. 

Goolrick  vs.  Wallace.  154  Ky.  596,  157  S.  W.  920,  49  L.  R. 
A.  N.  S.  789. 

18.  Doom  vs.  Shel•^\•in.  20  Colo.  234,  38  P.  56. 


82  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  40 

COXDITIOX  HAS  BEEN  FULFILLED  OK  NOT.  BuT  ANY  PERSON 
TO  WHOM  AN  INSTRUMENT  SO  INDORSED  IS  NEGOTIATED,  WILLi 
HOLD  THE  SAME,  OR  THE  PROCEEDS  THEREOF,  SUBJECT  TO 
THE   RIGHTS   OF  THE  PERSON   INDORSING  CONDITIONALLY." 

While  the  instrument  must  contain  the  unconditional 
promise  or  order  of  the  person  who  originally  issues  it 
to  pay  it  (Sec.  1),  the  holder  may  transfer  it  by  indorse- 
ment so  that  it  shall  become  payable  to  the  indorsee  only 
upon  the  happening-  of  some  condition  which  he  names. 
The  indorser  may  do  this  by  indicating  at  his  signature 
the  condition  upon  which  it  is  to  become  payable  to  the 
person  to  whom  he  negotiates  it.  One  taking  an  instru- 
ment which  is  indorsed  in  this  manner  may  in  turn 
transfer  it  to  another,  but  when  the  instrument  is  paid, 
the  holder  W'ho  receives  payment  must  hold  the  proceeds 
subject  to  the  rights  of  that  party  who  made  the  condi- 
tional indorsement.  But  the  one  who  is  required  to  ])a.y 
the  instrument  is  not  bound  by  the  condition  imposed  by 
the  indorser,  whether  it  is  fulfilled  or  not.  He  may  disre- 
gard the  condition  and  pay  the  instrument  to  the  holder 
at  maturity  and  his  payment  will  discharge  his  obliga- 
tion. He  is  not  bound  by  the  conditional  indorsement  to 
see  that  the  proceeds  of  the  instrument  are  applied  in 
accordance  with  the  condition  imposed  by  the  indorser. 
It  will  be  the  duty  of  the  person  to  whom  he  pays  the 
instrument  to  see  to  that. 

Indorsement  of  "Sec.    40.      Where    an    instrument," 

instrument  paya-  payable  to  bearer,  is  indorsed  specially, 
ble  to  bearer.  ^^^  nevertheless  be  further   nego- 

"Illinois. 

TIATED  BY  DELIVERY;  BUT  THE  PERSON  IN- 
DORSING specially  IS  LIABLE  AS  INDORSER  TO  ONLY  SUCH 
HOLDERS   AS    MAKE   TITLE    THROUGH    HIS    INDORSEMENT." 

If  an  instrument  which  is  upon  its  face  expressly  made 
payable  to  bearer  becomes  specially  indorsed  during  its 
negotiation,  that  is,  if  it  obtains  an  indorsement  which 
specifies  the  person  to  whom  or  to  whose  order  it  is  to 


§40  NEGOTIATION  83 

be  payable,  it  may,  nevertheless,  be  transferred  by  de- 
livery. In  other  words,  it  is  not  necessary  that  such  an 
instrument  shall  be  indorsed  by  the  person  named  in  the 
special  indorsement.  That  person  or  any  subsequent 
holder  may  transfer  it  without  indorsement  if  the  trans- 
feree will  accept  it  so.  But  the  person  who  indorsed  it 
specially  will  enjoy  a  certain  immunity  from  liability, 
that  is,  he  will  be  liable  upon  the  instrument  only  to  those 
persons  w^ho  make  title,  which  means  who  constitute 
some  other  person  the  owner  of  the  instrument,  through 
his  special  indorsement.  This,  of  course,  means  the  one 
named  in  the  special  indorsement  and  those  subsequent 
holders  to  whom  that  one  indorses  the  instrument  and 
who  in  turn  make  title  to  others  through  their  own  in- 
dorsements, and  does  not  include  persons  who  obtain  the 
title  to  the  instrument  by  mere  delivery  without  the 
indorsement  of  the  person  named  in  his  special  indorse- 
ment.    (Also  see  Sec.  67.) 

The  effect  of  this  section  is,  therefore,  that  an  instru- 
ment originally  payable  to  bearer  which  becomes  special- 
ly indorsed  may  continue  to  be  negotiated  without  further 
indorsement,  but  the  liability  of  the  special  indorser  is 
transmitted  only  to  such  person  or  persons  who  made 
title  through  his  indorsement.  It  follows  from  this  sec- 
tion that  a  restrictive  indorsement  upon  an  instrument 
originally  payable  to  bearer  would  not  be  effective.  But 
if  such  an  instrument  so  indorsed  is  negotiated  in  breach 
of  faith  by  the  indorsee,  the  restrictive  indorsement 
would  be  deemed  to  be  notice  of  a  defect  in  the  holder's 
title.     (Sees.  55  and  56.) 

A  distinction  is  made  in  this  section  between  an  in- 
strument which  is  originally  payable  to  bearer  and  one 
originally  payable  to  order  which  becomes  payable  to 
bearer  by  blank  indorsement.     The  first,  though  it  may 


84  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  41 

become  specially  indorsed,  does  not  require  a  blank  in- 
dorsement to  again  become  an  instrument  payable  to 
bearer.  It  continues  to  be  such  notwithstanding  the 
special  indorsement.  But  the  second,  originally  payable 
to  order  becomes  payable  to  bearer  when  the  only  or  last 
indorsement  upon  it  is  an  indorsement  in  blank  (Sec. 
9-5),  and  does  require  to  again  be  specially  indorsed  in 
order  to  resume  its  former  character  as  an  order  instru- 
ment after  it  has  been  changed  by  blank  indorsement  to 
one  payable  to  bearer.    (See  Sec.  34.) 

Indorsement  *'Sec.   41.     Where  an   ixstrument   is 

where  payable  to  payable  TO  THE   oeder  of  two   or   more 

two  or  more  payees,  or"  indorsees  who  are  not  part- 

persons.  ners,  all  must  indorse,  unless  the  one 

"Wisconsin. 

indorsing  has  authority  to  indorse  for 

THE  others," 

When  an  instrument  is  expressly  made  payable  to  two 
or  more  persons  who  are  not  partners  all  who  are  named 
as  payees  must  indorse  in  order  to  negotiate  it,  unless 
one  who  does  it  for  all  acts  by  the  authority  of  the  oth- 
ers. This  authority  need  not  be  expressly  given  but  may 
be  implied  from  the  circumstances  under  which  the  in- 
strument was  issued  or  transferred.  It  has  been  held,  for 
example,  that  where  two  persons  sign  upon  its  face  an 
instrument  which  recites  that  it  is  payable  to  "myself" 
or  order,  the  one  having  signed  for  the  accommodation 
of  the  other,  and  it  was  intended  that  the  latter  alone 
should  receive  the  proceeds  of  the  instrument,  a  transfer 
upon  his  indorsement  alone  mil  vest  the  holder  with 
title  enforceable  against  both.^^  Wlien  the  instrument  is 
made  payable  by  indorsement  to  two  or  more  persons 
who  are  not  partners,  all  must  indorse  it  unless  one  has 
authority  to  act  for  all,  but  if  two  or  more  persons  named 
as  payees  or  indorsees  are  partners  in  a  trading  part- 

19.     First  Katl.  Bank  vs.  Fowler,  36  Ohio  St.  524. 


§42  NEGOTIATION  85 

nersliip  any  partner  has  the  right,  m  a  partnership 
transaction,  even  in  the  absence  of  express  authority,  to 
indorse  the  instrument  in  the  name  of  the  partnership 
and  all  partners  will  be  bound  by  his  act.^° 

^  .    ,  ''Sec.  42.     AVhere  an  instrument   is 

Effect  of  instru- 
ment  drawn  or       ^^^^^N     OR     indorsed     to     a     terson     as 

indorsed  to  a  ''cashier''  or  other  fiscal  officer  of  a 

person  as  bank  or  corporation,  it  is  deemed  prima 

cashier.  facie  to  be  payable  to  the  bank  or  cor- 

«So.  Dakota  poration  of  which  he  is  such  officer, 

AND  MAY  BE  NEGOTIATED  BY  EITHER*  THE  INDORSEMENT  OF 
THE  BANK  OR  CORPORATION,  OR  THE  INDORSEMENT  OF  THE 
OFFICER." 

If  an  instrument  is  dra^^aI  or  is  indorsed  so  that  it  is 
payable  to  a  cashier  or  other  "fiscal  officer  of  a  bank 
or  corporation"  it  is  taken  to  be  payable  to  the  bank  or 
corporation  of  which  he  is  such  officer,  until  the  contrary 
is  shown.  A  fiscal  officer  is  one  w^hose  duties  pertain  to 
the  finances  of  the  bank  or  corporation  of  which  he  is 
an  officer.  Such  an  instrument  is  payable  to  the  bank  or 
corporation  of  which  the  person  named  is  an  officer  and 
may  be  negotiated  by  the  indorsement  of  the  bank  or 
corporation  though  made  upon  it  by  another  of  its  duly 
authorized  officers,  or  it  may  be  negotiated  by  the  in- 
dorsement of  the  officer  named  in  the  instrument.  In 
either  case,  the  indorsement,  if  made  by  another  by  au- 
thority of  the  bank  or  corporation,  or  if  made  by  such 
officer,  is  considered  to  be  the  act  of  the  bank  or  corpora- 
tion named  and  is  good.  The  indorsement  for  transfer 
by  a  public  officer  of  an  instrument  which  carries  notice 
upon  its  face  that  it  is  the  property  of  the  corporation, 
will  not  convey  the  title  to  the  instrument  if  the  officer 


20.     Drexler  vs.  Smitli,  30  Fed.  754. 

Fulton  vs.  Loualilin,  118  Ind.  286,  20  K  E.  796 
Moorehead  vs  Gilmore,  77  Pa.  St.  118,  18  Am.  Hep.  435. 
Gansevoort  vs.  Williams.  14  Wendell    (N.  Y.)   138. 


86  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  43 

negotiates  it  for  his  private  use.-^  As  to  transfer  by  or 
payment  to  officers  of  other  corporations  or  public  offi- 
cers, see  Sec.  8,  Sub-sec.  6,  and  Sec.  21,   • 

Indorsement  "Sec.  43.    Where  the  name  of  a  payee 

where  name  is  or  indorsee  is  wrongly  designated  or 
misspelled,  misspelled,  he  may  indorse  the  instru- 

fit    C  fit  61*3. 

ME  NT  AS  THEREIN  DESCRIBED,  ADDING,  IF  HE 
THINK  FIT,  HIS  PROPER  SIGNATURE." 

If  the  nanie  of  the  payee  or  indorsee  is  misspelled  or 
he  is  incorrectly  designated  or  described,  he  may  in- 
dorse the  instrument  in  the  manner  in  which  his  name  is 
misspelled  or  by  his  w-rong  designation.-^  He  is  not 
obliged  to  but  he  may,  in  addition  thereto,  indorse  it  by 
his  proper  name  or  proper  designation,  if  he  think  fit, 
and  this  is  usually  done.  Indorsement  by  the  i^erson 
named  in  his  proper  name  or  by  his  proper  designation 
is,  of  course,  good  although  he  neglects  to  indorse  by 
the  misspelled  name  or  improper  designation  or  descrip- 
tion. If  one  does  business  in  the  name  of  a  company  and 
the  instrument  is  made  payable  to  the  company  name,  in- 
dorsement in  his  o\^^l  name  ^\ill  be  sufficient  to  transfer 
the  title.^^ 

Indorsement  ''Sec.  44.    Whef^e  any  person  is  under 

in  representative  obligation  to  indorse  in  a  representa- 
capacity.  ^^^^  capacity,  he  may  indorse  in  such 

TERMS   as    to    negative    PERSONAL   LIABILITY." 

When  an  instrument  requires  the  indorsement  of  a 
person  who  is  not  a  party  to  it  except  as  the  representa- 
tive of  another,  he  may  indorse  it  in  any  way  he  desires 
in  order  to  show  that  he  does  it  in  his  representative 
capacity,  and  that  he  does  not  intend  to  assume 
any  personal  liability  upon  the  instrument.    No  particu- 

21.  Quincv  Mut.   Firp  Ins.   Co.   vs.   International   Trust   Co.,  217 

Mass.  370. 

22.  Hunt  vs.  Stewart,  7  Ala.  525. 

23.  Brj^ant  vs.  Eastman,  7  Gushing  (Mass.)  111. 


§  45, 46  NEGOTIATION  87 

lar  form  of  words  is  required.     Any  which  will  convey 
his  meaning  will  be  sufficient.-^ 

Time  of  *'Sec.  45.     Except  where  an  indorse- 

indorsement ;  ment  bears  date  after  the  maturity  of 

presumption.  ^^^    instrument,    every    negotiation    is 

deemed  prima  facie  to  have  been  effected  before  the 
instrument  was  overdue." 

The  date  which  an  indorsement  bears  is  presumed  to 
be  the  date  when  it  was  made.  Every  undated  indorse- 
ment is  presumed,  until  the  contrary  appears,  to  have 
been  made  and  every  negotiation  to  have  been  effected 
before  the  instrument  became  past  due.  This  presump- 
tion may  be  overcome  and,  in  a  controversy,  the  true 
date  shouni  by  proof.-^  The  rights  and  liabilities  of  in- 
dorsers  before  and  after  maturity  differ  in  very  impor- 
tant respects  and  if  an  indorsement  is  placed  upon  an 
instrument  after  its  maturity,  it  ought  to  be  dated,  for  a 
date  often  becomes  very  important  in  determining  the 
rights  of  the  interested  parties.  (See  Sec.  52.) 
Place  of  "Sec.  46.   Except -where  the  contrary 

indorsement;  appears,  every  indorsement  is  presum]':d 

presumption.         prima  facie  to  have  been  made  at  the 

PLACE    where    the    INSTRUMENT    IS   DATED." 

The  place  where  an  indorsement  is  made  sometimes 
becomes  important  in  fixing  the  rights  or  the  liability  of 
the  indorser,  for  the  reason  that  each  negotiation  is  re- 
garded as  a  distinct  and  new  contract  upon  the  terms  of 
the  instrument  or  upon  such  modifications  as  may  have 
been  imposed  at  any  negotiation.-^  If  the  indorsement  is 
made  at  a  place  other  than  that  where  the  instrument  is 
dated,  particularly  if  made  in  another  State  whose  laws 
may  yet  be  different  from  those  of  the  State  where  the 

24.     Chelsea  Exchg.  Bk.  vs.  First  U.  P.  ChiTrch,  89  Misc.  (In^.  Y.) 

616,  620. 
25      Cedar  Rapids  Natl.  Bk.  vs.  Bashara,  39  Okla.  4,S2. 
26.     Smith  vs.  Caro  &  Brown,  9  Orej^on.  278. 
Freese  vs.  Browncll,  35  N.  J.  L.  285. 


88  THE  NEGOTIABLE  INSTRUMENTS  LAW    §  47, 48 

instrument  was  made,  it  ouglit  to  indicate  that  fact.-^ 
All  indorsements  are  presumed  to  have  been  made  at 
the  place  where  the  instrument  is  dated  unless  the  con- 
trary appears  or  is  showm.  This  presumption  is  con- 
clusive in  favor  of  any  holder  in  due  course  who  had  no 
notice  to  the  contrary  before  taking  the  instrument  and 
the  contrary  cannot  be  showTi  as  to  him  even  if  true,  but 
it  has  been  held,  as  to  others,  that  an  undated  indorse- 
ment is  to  be  regarded  as  having  been  made  at  the  place 
of  residence  of  the  indorser.^^ 

Continuation  of  "Sec.  47.  An  instrument  negotiable 
negotiable  j>^-  jr^j,  origin  continues  to  be  negotiable 

until  it  has  been  restrictively  indorsed 
or  dtsch.^rged  by  payment  or  otherwise." 

An  instrument  which  is  negotiable  when  first  issued 
continues  to  be  so  until  it  has  been  restrictively  indorsed 
or  until  it  has  been  discharged.  It  continues  to  be  nego- 
tiable even  after  maturity.^^  The  only  form  of  restric- 
tive indorsement  which  entirely  destroys  its  negotiable 
character  is  that  which  forbids  its  further  negotiation. 
(Sec.  36.)  A  restrictive  indorsement  is  made  in  the 
manner  described  in  Section  36  and  confers  upon  the 
holder  such  rights  as  are  set  forth  in  Section  37.  The 
discharge  of  the  instrument  may  be  effected  by  payment 
or  in  any  of  the  ways  enumerated  under  Sec.  119. 
Striking  out  **Sec.   48.     The   holder*  may  at   any 

indorsement.  time  strike  out  any  indorsement  which 

"Kentucky.  ^^  ^^^  necessary  to  his  title.     The  in- 

DORSER  whose  INDORSEMENT  IS  STRUCK  OUT.  AND  ALL  IN- 
DORSERS  SUBSEQUENT  TO  HIM,  ARE  THEREBY  RELIEVED  EROM 
LIABILITY  ON  THE  INSTRUMENT." 

The  holder,  whether  he  be  or  be  not  himself  an  in- 
dorser,  mav  strike  out  any  indorsement  upon  the  instru- 


27.  Cliemical  Natl.  Bk.  vs.  Kello^s,  183  N.  Y.  92,  75  N.  E.  1103, 

111  Am.  S.  R.  717,  2  L.  R.  A.  N.  S.  299,  5  Ann.  Cas.  158. 
Mackintosh  vs.  Gibbs  (N.  J.).  74  Atl.  708. 

28.  Simpson  vs.  White,  40  N.  H.  540. 

29.  Oakdale  Mf-.  Co.  vs.  Clarke,  29  R.  I.  192,  199,  69  Atl.  681. 


§  48  NEGOTIATION  89 

ment  which  is  not  necessary  to  prove  his  ownership  of 
the  instrument.  Those  indorsements  necessary  to  a 
holder's  title  are  the  indorsements  of  the  payee  and  of 
subsequent  special  indorsers  and  persons  named  in  any 
special  indorsements  through  whom  the  holder  must 
trace  his  ownership.^'^  The  indorsement  of  the  payee 
should  never  be  struck  out,  and,  unless  the  payee  has  in- 
dorsed in  blank,  the  indorsement  of  all  persons  named 
in  special  indorsements  will  be  necessary  to  prove  the 
holder's  title.  But  when  a  blank  indorsement  appears 
upon  the  instrument,  whether  it  be  the  indorsement  of 
the  payee  or  any  subsequent  indorser,  the  holder  may 
strike  out  all  subsequent  indorsements  and  show  title 
under  that  blank  indorsement.^^  And  he  may  do  this  be- 
fore or  at  the  trial  of  an  action  upon  the  instrument.^- 
Such  indorsements  as  are  necessary  to  show  how  the 
holder  could  or  did  acquire  title  to  the  instrument  are 
usually  readily  ascertainable  from  the  manner  in  which 
they  are  made  upon  the  instrument  but  the  holder  must 
exercise  considerable  care  in  striking  out  the  names  of 
those  persons  upon  whom  he  does  not  intend  to  rely. 
Parties  whose  names  are  struck  out  cease  to  be  liable  up- 
on the  instrument  as  do  all  those  who  indorsed  subse- 
quent to  that  one  or  those  Avhose  names  are  thus  elimi- 
nated. The  indorsements  of  all  persons  named  in  special 
indorsements  may  be  necessary  in  order  to  show  the  hold- 
er's title  to  the  instrument,^^  and  will  be  necessary  if  there 
is  no  blank  indorsement  upon  it.  The  occasion  for  strik- 
ing out  indorsements  does  not  usually  arise  un- 
til the  instrument  has  been  re-negotiated  to  a  party  who 

30.  Porter  vs.  Cushman,  19  111.  572. 

31.  Vanarsdale  vs.  Hax,  107  Fed.  878. 

New  Haven  Mfg.  Co..  vs.  New  Haven  Pulp  &  Board  Co.,  76 

Conn.  126. 
Ensign  vs.  Fogg,  177  Mich.  317. 

32.  Carter  vs.  Butler,  264  Mo.'  306. 


90  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  49 

has  previously  negotiated  it,  or  it  returns  to  the  holder 
after  an  ineffectual  attempt  to  collect  it  during  which  it 
has  obtained  indorsements  which  are  in  no  way  neces- 
sary to  establish  his  relationship  to  the  parties  against 
whom  he  seeks  to  enforce  it.  (See  Sec.  121.)  The  hold- 
er may  then  strike  out  his  own  indorsement  even  though 
it  be  restrictive.^^ 

Transfer  ' '  Sec.  1:9.    Wheke  the  holdee  of  an  in- 

without  stkument  payable  to  his  order  transfers 

indorsement;         jrj,  ^^^  value  without  indorsing  it,  the 

effect  of.  TRANSFER    VESTS    IN    THE    TRANSFEREE    SUCH 

"Illinois,  „^^T^^ 

Missouri.  TITLE     as     the     transferor     had     THEREIN, 

^Colorado,  and   the    transferee    acquires,   in    addi- 

Alabama.  tion,  the  right"  to    have    the    indorse- 

fWisconsin.  ment  of  the  transferor.''     But  for  the 

purpose  of  determining  whether  the  transferee  is  a 
holder  in  due  course,  the  negotiation  takes  effect  as 

OF  THE  time  when  THE  INDORSEMENT  IS  ACTUALLY  MADE."" 

The  transfer  of  an  instrument  payable  to  order  with- 
out the  indorsement  of  the  payee  or  the  indorsee  named 
in  the  special  indorsement  will  convey  the  title  to  the 
holder  but  it  is  not  a  negotiation.  While  the  transferee 
acquires  title  to  the  instrument  by  such  a  transfer  and 
may  bring  an  action  upon  it,  he  does  not  acquire  with  its 
possession  the  status  of  a  holder  in  due  course  (Sec.  59) 
until  he  secures  the  indorsement  of  his  transferor. 

When,  upon  the  transfer  of  such  an  instrument,  the 
transferor  neglects  to  indorse  it  before  its  transfer,  he 
should  be  required  to  do  so  as  quickly  as  possible  if  his 
indorsement  was  contemplated.  Until  it  is  obtained  the 
transferee  will  hold  the  instrument  subject  to  all  the  de- 
fenses existing  between  its  other  parties^*  and  subject  to 
the  same  defenses  as  if  the  instrument  were  non-nego- 

33.  Jerman  vs.  Edwards,  29  App.  C.   (U.  C.)  535. 

34.  Martz  vs.  State  Natl.  Bk.,  147  App.  Div.   (N.  Y.)  250. 
Goodsell  vs.  McElrov  Bros.  Co.,  86  Conn.  402.  85  A.  509. 
Cantrell  vs.  Davidson.  180  Mo.  A.  410,  168  S.  W.  271. 
Kiefer  vs.  Tolbert,  128  Minn.  519,  151  N.  W.  529. 


§  50  NEGOTIATION  91 

tiable,  unless  it  is  one  which  was  originally  payable  to 
bearer.  Such  an  instrument  is  transferable  by  mere  de- 
livery even  after  it  has  become  specially  indorsed.  (Sec. 
30.)  This  section  gives  the  person  to  whom  an  instru- 
ment is  so  transferred  the  right  to  require  his  transferor 
to  indorse  it  and  he  may  be  compelled  to  do  so  by  means 
of  an  action  in  equity  if  he  will  not  do  it  voluntarily. 

The  Act  does  not  provide  that  any  holder  subsequent 
to  the  transferee  has  this  right  but  it  is  undoubted  in 
the  transferee  and  he  can  compel  the  transferor  to  in- 
dorse the  instrument.  However,  equity  will  also  inter- 
vene in  behalf  of  subsequent  holders  and  any  such  could, 
in  a  proper  proceeding  in  equity,  compel  its  indorsement. 
If  the  indorsement  is  made  later  than  the  date  of  the 
transfer  of  the  instrument  and  it  is  questioned  whether 
or  not  the  transferee  is  a  holder  in  due  course  the  nego- 
tiation is  considered  to  have  taken  effect  upon  the  date 
when  the  indorsement  is  actually  made,  and  not  the  date 
when  the  instrument  was  transferred  to  the  holder.  If 
in  the  interval  the  transferee  without  indorsement  re- 
ceives notice  of  a  defect  in  the  instrument,  or  the  title  to 
it,  he  will  be  bound  by  such  notice  even  if  he  has  paid  full 
consideration.^^ 

When  prior  party  ''Sec.  50.  Where  an  instrument  is 
may  negotiate  xegotiated  back  to  a  prior  party,  SUCH 
instrument.  party  may,  subject  to  the  provisions  of 

THis  Act,  re-issue  and  further  negotiate  the  same.  But 

HE  IS  not  entitled  TO  ENFORCE  PAYMENT  THEREOF  AGAIXST 
ANY  INTERVENING  PARTY  TO  WHOM  HE  WAS  PERSONALLY 
LIABLE." 

A  negotiable  instrument  may  be  re-issued  or  re-nego- 
tiated by  a  party  who  has  once  before  had  it,  if  in  its 
course  it  returns  to  him,  and  it  is  then  subject  to  all  of 

35.     Benson  vs.  Abbott.  95  Ga.  69. 
Weber  vs.  Orton,  91  Mo.  677. 
Thompson-Houston   El.  Co.   vs.   Capitol  El.   Co.,  56  Fed.  849. 


92  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  50 

the  provisions  of  this  Act  as  upon  its  first  issue.  If,  how- 
ever, any  party  to  the  instrument  does  again  receive  it 
and  indorses  and  negotiates  it  a  second  time,  he  cannot 
enforce  its  payment  against  any  person  to  whom  he  him- 
self was  personally  liable  on  its  first  negotiation.  This 
includes  parties  who  became  such  between  his  first  nego- 
tiation of  the  instrument  and  its  return  to  him.^^  One 
who  indorsed  the  instrument  without  recourse  is,  there- 
fore, not  subject  to  this  limitation.^'^  As  to  others,  and 
new  parties  the  instrument  is  treated  as  if  it  were  upon 
its  first  issue  and  negotiation.  If  the  instrument  has  re- 
turned to  the  drawer  or  maker  and  it  is  re-issued  by  him, 
the  fact  that  it  is  in  his  hands  is  notice  that  it  has  run  its 
course^®  but  if  he  re-issues  it  before  maturity,  it  pro- 
ceeds as  upon  a  new  negotiation  and  in  some  jurisdictions 
it  is  held  that  no  party  to  its  first  negotiation,  except 
himself,  is  then  liable  to  anyone  who  takes  the  instru- 
ment upon  its  second  issue.  In  others,  it  is  held,  upon 
what  seems  to  be  the  better  reasoning,  that  all  secondary 
parties  remain  liable  upon  their  contracts  of  endorse- 
ment until  the  maturity  of  the  instrument. ^^^  (See  also 
Sees.  119  and  121.) 

36.  Adrian  vs.  McCaskiU,  103  N.  C.  182. 

37.  Froiieh  vs.  Barney,  23  N.  C.  219. 

38.  Quinibv  vs.  Varnum,  190  Mass.  231,  76  N.  E.  671. 
Downinc;  vs.  Neeley   (Tex.  Civ.  App.),  129  S.  W.  1192. 
First  Nat.  Bk.  vs.  Harris,  7  Wash.  139. 

Aurora  St.  Bk.  vs.  Hayes-Eames  El.  Co.,  88  Nebr.  187. 
38a.     See  Note  L.  R.  A.  1918  E.  170. 


§51  RIGHTS   OF  HOLDER  ^'-^ 


SUBDIVISION  IV, 


Eights  of  Holder. 

Section  1  Section  '  \ 

51  Right    of    holder    to    sue —   56     What    constitutes    notice    of 

payment.  defect. 

52  AYhat  constitutes  a  holder  in   57     Riohts     of     holder     in     due 

due   course.  course. 

53  When  person  not  deemed  to    58     When  subject  to  original  de- 

be  a  holder  in  due  course.  fenses. 

54  Notice    before    full    amount   59     Who   deemed   holder   in   due 

paid.  course. 

55  When  title  defective. 

The  person  who  is  in  lawful  possession  of  the  instru- 
ment as  payee,  indorsee,  or  bearer  (Sec.  191),  is  the 
holder  and  he  is  entitled  to  recover  its  proceeds  and 
may  bring  an  action  upon  the  instrument  in  his  own 
name,  even  if  it  is  the  property  of  another.  In  this 
respect,  a  negotiable  instrument  differs  from  a  simple 
contract  for  the  payment  of  money  for  of  the  latter, 
in  States  w^here  the  real  party  in  interest  is  required  to 
bring  an  action  in  his  o\\m  name,  no  assignment  can  be 
made  for  the  mere  purpose  of  collection  which  will  en- 
able the  assignee  to  sue  upon  the  contract  in  his  own 
name.  The  holder  of  a  negotiable  instrument,  however, 
has  sufficient  title  for  the  purpose  of  suit  even  if  he  is 
not  a  holder  for  value  or  in  due  course,  or  has  no  inter- 
est in  the  instrument  or  its  proceeds.  The  Court  will 
never  inquire  whether  he  brings  the  action  in  his  own 
behalf  or  for  another,  and  will  not  inquire  into  his  right 
of  possession  unless  the  question  is  raised  as  a  matter 
of  defense  upon  an  allegation  of  fraud  or  bad  f aith.^ 
Right  of  holder  "Sec.  51.  The  holder  of  a  negotl\ble 
to  sue;  payment,  instrument  may  sue  thereox  in  his  own 

NAME  ;  AND  PAYMENT  TO  HIM  IN  DUE  COURSE  DISCHARGES  THE 

INSTRUMENT.''^ _^____ 

1.     Lowell  vs.  Bickford.  201  Mass.  543. 


94  THE  NEGOTIABLE  INSTRUMENTS  LAW         §52 

If  the  person  who  is  obliged  to  pay  the  instrument 
pays  a  holder  at  or  after  its  maturity  even  though  he  be 
not  the  owner,  he  will  have  discharged  the  obligation 
completely  unless  he  knows  or  not  knowing,  is  chargeable 
with  the  duty  to  know  that  the  holder  has  no  authority 
to  receive  the  payment.  The  subject  of  payment  will  be 
treated  further  under  Section  88. 

-^^^^  *'SeC.  52.      A  HOLDER  IN  DUE  COURSE  IS  A 

constitutes  a  holder  who  has  taken  the  instrument 

holder  in  due  under  the  following  conditions: 

course.  1.     That  it  is  complete  and  regular 

•Wisconsin.  ^.p^^.  ^^^  ^^^^. 

2.  That  he  became  the  holder  of  it  before  it  was 
overdue,  and  without  notice  that  it  had  been  previ- 
ously dishonored,  if  such  was  the  fact  ; 

3.  That  he  took  it  in  good  faith  and  for  value  ; 

4.  That  at  the  time  it  was  negotiated  to  him  he  had 
no  notice  of  any  infirmity  in  the  instrument  or  defect 
in  the  title  of  the  person  negotiating  it.""" 

This  section  defines  the  term  '4iolder  in  due  course" 
which  has  been  so  frequently  used  up  to  this  time.  To 
become  entitled  to  the  protection  of  the  provisions  of  this 
Act  in  favor  of  a  holder  in  due  course,  every  person  who 
takes  a  negotiable  instrument  must  see  to  it  that  he  does 
so  with  the  necessary  qualifications. 

One  becomes  a  holder  in  due  course  if  the  instrument 
he  holds  and  seeks  to  enforce  is  first  of  all  complete  and 
regular  upon  its  face.  This  general  statement  would 
seem  to  mean  that  the  instrument  must  have  been  com- 
plete when  issued  and  negotiated  in  accordance  with  the 
provisions  of  this  Act  and  must  not,  on  its  face,  show 
that  it  has  been  altered,-  and  these  essential  requisites  to 

2.     Manussicr  vs.  Wriyht,  158  111.  A.  214. 

Barton  Sav2:s.  Bk.  Co.  vs.  Stephenson,  87  Vt.  433,  89  A.  639. 
Holbart  vs.  Lauretson,"  34  S.  D.  267. 
Marion  Natl.  Bk.  vs.  Russell.  14  Kv.  L.  368. 
Critten  vs.  Chemical  Bk..  171  N.  Y.  219,  231. 
In  re  Philpot's  Est.,  151  N.  W.  (Iowa)  825. 


§52  EIGHTS   OF  HOLDER  95 

his  title  will  appear  with  appropriate  explanations  at 
their  proper  places.  If  there  are  such  ambiguities  or 
contradictions  in  the  instrument  that  they  are  irrecon- 
cilable, or  they  indicate  that  either  one  of  two  interpreta- 
tions may  be  applied  with  equal  certainty  or  uncertainty, 
this  would  constitute  an  irregularity  which  would  destroy 
its  negotiability  if  they  affect  the  sum  payable  or  the 
place  where,  time  when,  or  the  parties  to  whom  the  in- 
strument is  payable.  (Subd'n  1.)  The  holder  must  be 
prepared  to  show  that  he  acquired  the  instrument  before 
it  matured  and  if  it  had  previously  been  dishonored  or  re- 
pudiated, he  must  be  prepared  to  show  that  he  had  no 
notice  of  its  dishonor.  He  is  not  obliged  to  prove  these 
qualifications  unless  challenged,  but  if  a  lack  of  them  is 
alleged  against  him,  and  some  proof  offered  to  sustain 
the  allegation,  he  will  have  the  burden  of  proving  that 
he  is  a  holder  in  due  course. 

If  an  instrument  which  is  payable  on  demand  is  offered 
for  negotiation  an  unreasonable  length  of  time  after  its 
issue,  the  person  who  takes  it  will  not  be  considered  a 
holder  in  due  course.  The  term  ''due  course"  supposes 
that  the  instrument  has  passed  in  a  single  transaction,  or 
passes  steadily  and  regularly  from  one  person  to  another 
in  a  series  of  regular  business  transactions,  and  is  trans- 
ferred under  the  usual  customs  and  usages  of  business, 
thus  including  any  purchase  in  good  faith  for  value  of  a 
note  or  bill  before  maturity.^  If  such  an  instrument  stops 
in  its  course  for  an  unreasonable  length  of  time  in  the 
possession  of  one  holder  or  continues  to  be  negotiated  for 
an  unreasonable  length  of  time  after  its  issue,  without 
presentment  and  demand  for  payment,  a  suspicion  arises 

3.     Tischer  vs.  Merea,  138  Ind.  586,  21  N.  E.  316. 
Kellogs;  vs.  Curtis,  69  Me.  212,  31  Am.  R.  273. 
First  Natl.  Bk.  vs.  Flath,  10  N.  D.  281,  286,  86  N.  W.  867. 
Kimbro  vs.  Lytle,  10  Yerger  (Tenn.),  417,  31  Am.  D.  585. 


96  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  52 

of  irregularity,  or  that  some  infirmity  may  have  caused 
the  delay  in  presenting  or  negotiating  it  when  it  is  again 
offered  for  negotiation.  The  rigidity  with  which  the  Act 
is  applied  to  the  enforcement  of  the  duties  of  maker, 
drawer,  acceptor,  and  indorser  of  a  negotiable  instrument 
is  not  relaxed  when  its  provisions,  by  which  his  standing 
is  to  be  determined,  are  applied  to  the  holder.  If  the 
holder  is  a  "holder  in  due  course"  he  will  hold  the  in- 
strument free  from  all  defenses  Avhich  prior  parties 
might  have  among  themselves  (Sec.  57)  and  a  familiarity 
with  the  provisions  of  this  subdivision  is  of  the  utmost 
importance. 

The  holder  must  also  have  taken  the  instrument  in  good 
faith  and  for  value.  Value  here  does  not  mean  full  value, 
but  he  must  have  given  some  consideration  for  its  trans- 
fer, or  have  acquired  the  instrument  through  some  one 
who  did,  and  that  consideration  must  have  been  suffi- 
cient to  sustain  his  right  to  recover  upon  the  instrument. 
(For  definition  of  value  see  Sees.  25  and  191.) 

The  discount  of  negotiable  paper  by  a  bank  will  not 
constitute  the  bank  a  holder  in  due  course,  under  this 
section,  when  it  is  shown  that  the  proceeds  have  been 
placed  to  the  credit  of  its  customer  and  remain  in  the 
bank.*  Nor  does  the  mere  crediting  of  a  check  if  the 
customer's  account  continues  to  hold  sufficient  money  to 
pay  it  if  it  is  dishonored,^  or  the  item  is  credited  for 
collection.^  But  if  the  customer  checks  against  the  dis- 
count or  deposit,  or  the  bank  incurs  a  liability  upon  the 
items,  it  then  becomes  a  holder  for  value. '^    Likewise  if 

4.  Albany  Co.  Bank  vs.  Ice  Co.,  92  App.  Div.  (N.  Y.)  47. 
Merchants  Bk.  vs.  Santa  Maria  Sue:ar  Co.,  162  App.  Div.   (N. 

Y.)  248. 
Miller  vs.  Norton,  114  Va.  610. 
McKniii^ht  vs.  Parsons,  136  la.  390. 

5.  Citizens  Bk.  vs.  Cowles,  180  N.  Y.  346. 

6.  Bank  of  America  vs.  Waydell,  187  N.  Y.  115. 

7.  Montrose  Savgs.  Bk.  vs.  Claussen,  137  Iowa,  73. 


§52  RIGHTS   OF   HOLDER  97 

the  proceeds  are  appropriated  by  the  bank  to  the  de- 
positor's indebtedness  to  it  before  receiving  notice  of 
any  infirmity  in  the  instrmnent  or  title  of  its  transferor,^ 
or  the  bank  lends  its  own  credit  for  the  customer's 
benefit.^  Payment  of  draft  with  bill  of  lading  attached  by 
crediting  the  drawer's  checking  account  will  constitute 
the  bank  a  holder  in  due  course,  whether  or  not  the 
drawer  had  checks  against  the  deposit  at  time  of  the 
credit.^" 

And,  lastly,  the  holder  must  not  have  had  notice  at  the 
time  it  was  negotiated  to  him,  or  before  that  time,  that 
the  instrument  is  not  all  right  and  just  what  it  purports 
to  be,  or  that  the  person  negotiating  it  had  not  a  good 
title  to  it.  The  provisions  of  Section  55  determine  when 
the  title  is  defective.  What  is  to  be  regarded  as  notice 
will  be  determined  by  Sec.  56.  If  none  of  the  defects 
enumerated  in  those  two  sections  exist  in  the  title  of  the 
holder,  and  he  has  not  acquired  the  instrument  contrary 
to  the  provisions  of  the  next  section,  he  will  be  deemed  a 
"holder  in  due  course"  and  can  require  payment  regard- 
less of  any  infirmities  or  defects  in  the  instrument  or 
its  prior  negotiation  and  recover  against  all  prior  in- 
dorsers  as  well  as  against  the  persons  primarily  liable 
upon  it,  except  those  whose  signatures  have  been  forged 
or  such  as  have  qualified  their  liability.  To  hold  the  in- 
dorsers  he  will  be  required  to  observe  the  provisions  re- 
specting presentment,  demand  and  notice  given  under 
Sees.  70  to  118. 

The  extent  to  w^hich  the  execution  and  delivery  or  the 
negotiation  of  an  instrument  on  Sunday  is  affected  by 
the  fact  that  it  is  done  on  that  day  and  its  effect  upon 
the  rights  of  the  holder,  will  depend  altogether  upon 

8.  City  Dep.  Bk.  vs.  Green,  130,  Iowa,  384. 

9.  Elgin  Banking  Co.  vs.  Hall,  199  Tenn.  548 ;  108  S.  "W.  1068. 

10.  Tapee  vs.  Varley,  184  Mo.  App.  470;  171  S.  W.  19. 


98  THE  NEGOTIABLE  INSTRUMENTS  LAW     §  53,  54 

other  statutory  enactment.  If  by  statute  in  the  State 
where  the  transaction  occurs  it  is  made  unlawful  to 
transact  business  on  Sunday,  then  the  execution  or  ne- 
gotiation of  the  instrument,  if  completed  on  that  day, 
will  be  illegal  and  void  as  between  the  parties.  To  affect 
subsequent  holders,  however,  this  infirmity  must  be  ap- 
parent from  the  instrument  itself. ^^ 

A  promissory  note  providing  that  default  in  payment 
of  any  installment  of  the  principal  or  interest  shall  cause 
the  whole  note  to  become  due  is  overdue  upon  the  fail- 
ure to  pay  the  matured  installment,  and  one  taking  it 
after  such  default  with  notice,  or  if  it  is  apparent  upon 
the  face  of  the  instrument,  will  not  be  a  holder  in  due 
course.^^    (See  Sec.  2.) 

When  person  not  ' '  Sec.  53.  Where  an  instrument  pay- 
deemed  holder  in  ^ble  qn  demand  is  negotiated  an  unrea- 
due   course 

sonabi^e  length  of  time  after  its  issue, 
the  holder  is  not  deemed  a  holder  in  due  course.  ' ' 

What  is  an  unreasonable  length  of  time  is  not  estab- 
lished by  this  act  at  any  fixed  period  nor  has  any  defi- 
nite rule  applicable  to  all  cases  been  laid  down  by  the 
courts.  In  determining  what  is  a  reasonable  or  an  unrea- 
sonable delay  the  particular  circumstances  of  each  case 
must  be  taken  into  account.    (Sec.  193.) 

Parties  to  the  instrument,  other  than  those  primarily 
liable,  will  be  discharged  by  any  unreasonable  delay  in 
presenting  and  demanding  payment  of  an  instrument 
payable  on  demand.  See  Sections  7-71-144  and  193  for 
more  on  this  subject. 

Notice  hefore  "Sec.  54.     When  the  transferee  re- 

full  amount  paid.  cei^t:s  notice  of  any  infirmity  in  the  in- 
strument OR  defect  in  the  title  of  the  person  nego- 
tiating the  same  before  he  has  paid  the  full  amount^ 
agreed  to  be  paid  therefor,  he  will  be  deemed  a  holder 

11.     Gilman  vs.  Berry,  59  N.  H.  62. 

12     Hodge  vs.  Wallace,  129  Wis.  84;  108  N.  W.  212;  116  A. 
S.  R.  938. 


§55  RIGHTS   OF  HOLDER  99 

IN  DUE  COURSE  ONLY  TO  THE  EXTENT  OF  THE  AMOUNT  THERE- 
TOFORE PAID  BY  HIM." 

It  has  already  been  said,  under  Sec.  52,  that  to  become 
a  holder  in  due  course,  one  must  have  acquired  the 
instrument  without  notice  of  any  defects  or  infirmities 
in  its  title.  If  it  should  happen,  as  it  sometimes  does, 
that  the  transferee  has  already  paid  a  part  of  the  con- 
sideration for  its  transfer  to  him  before  becoming  aware 
of  the  defect  which  exists  in  the  instrument  or  in  the 
title  of  the  person  who  negotiates  it  to  him,  he  will  then 
be  considered  a  holder  in  due  course  only  to  the  extent  of 
the  amount  he  paid  before  the  defect  or  infirmity  became 
known  to  him.  If  after  having  made  a  partial  payment 
on  account  of  the  transfer  of  the  instrument,  he  learns  of 
its  imperfection,  and  notwithstanding  that  fact  pays  the 
balance  agreed  to  be  paid  for  the  instrument  he  mil  not 
be  in  the  position  of  a  holder  in  due  course  as  to  the 
amount  he  pays  after  notice,  but  he  is  such  only  to  the 
amount  of  his  payment  before  notice. ^^  But  knowledge 
alone  is  not  necessarily  notice,  and  what  is  deemed  to  be 
''notice"  is  to  be  determined  by  the  application  of  the 
provisions  of  Sec.  56. 

When  title  ''Sec.  55.     The  title  of  a  person  who 

defective.  negotiates    an    instrument    is    defective 

«Wiscoiisiii.  within  the  meaning  of  this  act  when  he 

obtained  the  instrument,  or  any  signatures  thereto,  by 

FRAUD,  duress,  OR  FORCE  AND  FEAR,  OR  OTHER  UNLAWFUL 
MEANS,  OR  FOR  AN  ILLEGAL  CONSIDERATION,  OR  WHEN  HE  NE- 
GOTIATES IT  IN  BREACH  OF  FAITH,  OR  UNDER  SUCH  CIRCUM- 
STANCES AS  AMOUNT  TO  A  FRAUD. ' '  " 

When  the  instrument  is  obtained  or  negotiated,  or  any 
signature  upon  it  is  obtained  in  the  manner  indicated  in 
this  section,  the  title  of  the  person  who  so  procured  the 
instrument  or  signature  is  defective.     Any  person  who 

14.    Dresser  vs.  Missouri,  etc  R.  R.  Cons.  Co.,  93  U.  S.  93. 


100  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  55 

takes  the  instrument  with  notice  that  these  defects  or 
any  of  them  exist  is  also  affected  by  them  and  will  not  be 
considered  a  holder  in  due  course.  The  existence  of  any 
of  them  will  defeat  his  right  to  recover  upon  the  instru- 
ment against  any  person  who  became  a  party  under  such 
circumstances,  if  it  is  shown  that  he  knew  of  them  at  the 
time  or  before  he  acquired  the  instrument  or  if,  not 
knowing  of  their  existence,  he  is  chargeable  in  law  with 
a  duty  to  know.     (See  Sec.  56.) 

Fraud  consists  of  any  wilful  deception  by  which  the 
execution,  indorsement,  or  negotiation  of  the  instrument 
is  obtained.  Whether  the  fraud  is  a  positive  fraud,  con- 
structive fraud,  a  fraud  in  law,  or  the  circumstances  are 
such  as  amount  to  fraud,  must  be  determined  in  each  par- 
ticular case,  but  the  following  essential  elements  must 
exist  in  it : 

To  be  the  subject  of  an  action,  the  general  rule  is  that 
the  person  chargeable  with  the  fraud  must  have  made  a 
material  false  representation;^^  he  must  have  known 
when  he  made  it  that  it  was  false,  or  have  made  it  reck- 
lessly as  a  positive  assertion,  without  any  knowledge  of 
or  in  wilful  disregard  of  its  truth  or  falsity.^^  He  must 
have  made  the  false  or  reckless  representation  with  the 
intention  that  it  should  be  acted  upon  by  the  person 
whom  he  expected  to  influence  by  it  and  the  fraudulent 
representation  must  actually  have  been  acted  upon  by 


15.  Hall  vs.  Grayson   Co.  Natl.  Bk.,  36  Tex.  Civ.  App.  317,  81 

S.  W.  762. 
Peden  vs.  Birkle,  27  Colo.  A.  323,  148  P.  913. 

16.  Hale  vs.  Citizens  Bank,  111  Ark.  258,  163  S.  W.  775. 

Bank  vs.  Hale,  104  Ark.  388,  149  S.  W.  845. 

Hodgens  vs.  Jennings,  148  App.  Div.  (N.  Y.)  879,  133  N.  Y. 
S.  584. 


§55  RIGHTS   OF  HOLDER  101 

the  party  using  this  defense/'  who  must  thereby  have 
suffered  loss  or  injury.^^ 

The  concealment  of  any  material  fact  which  it  is  a 
duty  to  disclose  will  have  the  same  effect  as,  and  be  equiv- 
alent to  a  positive  misrepresentation.  Thus,  when  one 
obtains  or  procures  the  execution  or  indorsement  of  a 
negotiable  instrument,  or  induces  or  procures  any  one 
to  become  a  party  to  it  without  disclosing  all  material 
facts  in  relation  to  the  instrument  M^hich  he  owes  a  duty 
to  disclose  to  him,  he  will  have  perpetrated  a  fraud  upon 
him  and  if  he  thereby  obtains  title  to  the  instrument  his 
title  will  be  defective. ^^ 

Duress  is  a  condition  which  exists  when  one  is  induced 
or  compelled  by  the  unlawful  act  of  another  to  make  a 
contract  or  to  do  or  forego  some  act  under  circumstances 
which  overcome  the  mind  and  will  of  a  person  of  ordi- 
nary^ firmness  and  deprive  him  of  its  free  exercise. ^*^  If 
a  signature  to  a  negotiable  instrument  is  procured  under 
unlawful  threats  of  bodily  harm  or  of  harm  to  business^_ 
reputation  and  standing,  or  other  serious  harm  or  loss, 
either  to  the  signer  or  to  some  other  person,  a  member 
of  his  family  or  near  kinsman,  and  the  one  signing  is 
thereby  actually  put  in  fear  of  the  threatened  danger 
and  for  that,  and  no  other  reason,  makes  the  signature 
or  indorsement,  not  otherwise  being  obliged  to  do  so, 

17.  Champion   Foundry,   etc.,    Co.   vs.   Heskett,   125   Mo.   A.   516, 

102  S.  W.  1050. 
Hurst  vs.  Lee,  143  App.  Div.  (N.  Y.)  614,  127  N.  Y.  S.  1040. 
Bank  vs.  Hale,  104  Ark.  388,  149  S.  W.  845. 

18.  Keller  vs.  Johnson,  11  Ind.  337,  71  Am.  D.  355. 
Strickland  vs.  Parlin.  etc.,  Co.,  118  Ga.  213,  44  S.  E.  997. 
Bank  of  Commerce  vs.  Brayles,  16  N.  M.  414,  120  P.  670. 

19.  In  re  Lawrence,  166  Fed.,  239,  92  C.  C.  C.  A.  251. 
Hodge  vs.  Smith,  130  Wise.  326,  110  N.  W.  192. 

20.  Cribbs  vs.  Sowle,  87  Mich.  340,  49  N.  W.  587. 


102  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  55 

such  force  and  fear  constitute  duress^^  and  the  title  of 
a  person  taking  the  instrument  under  these  circum- 
stances, or  with  notice  of  their  existence,  is  defective. 
And  if  the  instrument  or  any  signature  upon  it  is  ob- 
tained by  other  unlawful  means,  the  title  of  any  holder 
chargeable  with  notice  of  the  unla^^'ful  means  by  which 
the  instrument  or  signature  was  obtained,  is  defective. 

If  the  consideration  for  the  instrument  or  its  negotia- 
tion is  illegal,  that  is,  one  not  lawful,  the  person  obtain- 
ing the  instrument  for  such  unlawful  consideration  does 
not  obtain  a  good  title  to  it.  Eead  what  is  said  under 
Section  5  in  regard  to  illegal  provisions  in  the  instru- 
ment. 

No  person  has  a  right  to  negotiate  the  instrument  in 
breach  of  faith;  which  means,  that  when  one  has  the  in- 
strument for  a  specific  purpose,  he  has  no  right,  without 
permission,  to  divert  it  to  a  different  use.  And  if  any 
one  obtains  the  instrument,  or  procures  it  to  be  indorsed, 
or  negotiates  it  under  such  circumstances  as  amount  to 
fraud,  he  cannot  obtain  or  convey  a  good  title  to  the 
transferee  who  is  chargeable  with  notice  of  its  fraudu- 
lent procurement  or  negotiation. ^^ 

The  defense  of  want  of  title  cannot  be  used  to  defeat 
the  enforcement  of  the  instrument  in  the  hands  of  one 
who  would  otherwise  be  a  holder  in  due  course,  unless  it 

21.  Bush  vs.  Brown,  149  Ind.  573,  19  Am.  Rep.  695. 
Swear  vs.  Carr,  76  Ga.  322,  2  A.  S.  R.  44. 

Com.  vs.  Reffitt,  149  Ky.  300,  148  S.  W.  48,  42  L.  R.  A.   (N. 

S.)  329  and  note. 
Burton  vs.  McMillan,  52  Fla.  469,  42  So.  849. 
Fire  Ins.  Co.  vs.  Hull,  51  Oh.  St.  270,  37  N.  E.  1116. 
Hodge  vs.  Wallace,  129  Wis.  84,  108  N.  W.  212,  116  A.  S. 

R.  938. 
AYiliiamson,  Halsell,  Frazier  Co.  vs.  Ackerman,  77  Kas.  502. 
Fountain  vs.  Bigliam,  2.35  Pa.  St.  35.  84  Atl.  131. 

22.  Gardner  vs.  Beacon   Tiaist   Co.,  190  Mass.   27,  76  N.   E.  445, 

112  A.  M.  S.  R.  443,  2  L.  R.  A.   (N.  S.)  767,  5  Ann.  Cas. 
581  and  note 
Larapman  vs.  Lampman,  118  Iowa,  140.  143,  91  N.  W.  1042. 


§56  RIGHTS   OF   HOLDER  103 

is  shown  that  he  had  knowledge  of  it  and  the  next  section 
Ijrovides  wliat  shall  constitute  notice. 

What  constitutes  "Sec.  56.  To  constitute  notice  of  an 
notice  of  defect,  usteikmity  in  the  instrument  ob  defect 
IN  the  title  of  the  person  negotiating  the  same,  the 
person  to  whom  it  is  negotiated  must  have  had  actual 
knowledge  of  the  infirmity  or  defect,  or  knowledge  of 
such  facts  that  his  action  in  taking  the  instrument 
amounted  to  bad  faith. ' ' 

A  mere  suspicion  of  the  existence  of  an  infirmity  in  an 
instrument  or  in  the  holder's  title  is  not  notice  that  such 
infirmity  exists.    Nor  is  mere  rumor,  though  it  has  come 
to  be  heard  by  the  person  who  is  about  to  take  the  in- 
strument, before  doing  so.     And  if  the  suspicion  and 
rumors  which  attend  the  instrument  are  such  as  would 
place  any  ordinarily  prudent  man  on  his  g-uard,  or  any 
other    circumstances    surrounding    the    transaction    are 
such  as  Avould  warn  him,  or  any  peculiarity  about  the  bill 
itself  or  the  parties  to  it  is  such  as  would  put  an  ordi- 
narily prudent  man  upon  guard  against  fraud  or  irregTi- 
larity,  these  are  not  sufficient,  of  themselves,  to  defeat 
the   holder's    right    of   recovery   upon    the    instrument. 
Such  things  are  not  considered  to  be  the  equivalent  of 
actual  notice  of  infirmity  in  the  instrument  or  the  hold- 
er's right  to  negotiate  it.    Unless  he  has  actual  know4- 
edge  of  the  infirmity  or  defect  in  the  title  of  the  person 
from  whom  he  takes  the  instrument,  or  unless  the  defect 
in  the  instrument  is  so  cogent  and  obvious  that  his  ac- 
tion in  taking  it,  notwithstanding  the  obvious  infirmity 
in  it  or  defect  in  the  holder's  title,  amounts  to  bad  faith, 
the  transferee  is  not  chargeable  with  notice.^^    But  if  he 


23.     Fillebrown  vs.   Havward,   190   Mass.   472.   77  N.   E.   4o. 
Goodman  vs.  Simonds,  20  How.  343,  15  L.  Ed.  934. 
Youni?  vs.  Lowry,  192  Fed.  825,  113  C.  C.  A.  149. 
Eoillv  vs.  McKinnon.  159  Fed.  78.  „  ^    ^     *     .-.t 

Union  Natl.  Bk.  vs.  Neill,  149  Fed.  711,   '9  C.  C  A.  417. 
Natl.  Bk.  vs.  Weston,  172  N.  Y.  250,  64  N.  E.  949. 


104  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  57 

has  reason  to  suspeet  fraud  or  irregularity  and  he  fails  to 
investigate  for  fear  his  suspicions  will  be  confirmed,  or 
his  investigation  disclose  a  defense  to  the  instrument,  he 
will  not  be  a  purchaser  in  good  faith  if  he  then  takes  it.^^ 

"Sec.  57.  A  holder  in  due  couese 
Rights  of  holder  holds  the  instrument  free  from  any 
in  due  course.       defects   of   title   of   prior   parties,   and 

flTllTnmR. 

^Wisconsin  free   from   defenses   available    to   prior 

parties,  among  themselves,*  and  may  en- 
force payment  of  the  instrument  for  the  full  amount 
against  all  parties  liable  thereon.  ^'^ 

Having  become  a  holder  in  due  course,  the  person  who 
has  actual  or  constructive  possession  of  the  instrument 
has  the  absolute  right  to  enforce  it  against  all  persons 
liable  upon  it.  He  is  not  concerned  with  any  defects  or 
imperfections  in  the  instrument  or  in  the  manner  of  its 
procurement  which  may  amount  to  matters  of  defense 
among  the  parties  themselves  and  all  parties  are  liable  to 
him  for  the  full  amount  of  the  instrument,  regardless  of 
their  rights  and  defenses  against  each  other.  His  title 
and  possession  are  absolute  and  he  can  require  pay- 
ment from  all  persons  whose  names  are  upon  the  instru- 
ment except  those  who  have  qualified  their  indorsements 
by  the  words  "without  recourse,"  or  words  of  equiva- 
lent meaning  (Sec.  38),  and  those  whose  names  upon  it 
were  forged  or  made  mthout  authority,  or  unless  the  in- 
strument was  void  at  its  inception  because  made  in  vio- 

Canajoharie  Natl.  Bk.  vs.  Defendorf,  123  N.  Y.  191,  25  N.  E. 

402,  10  L.  R.  A.  676  and  note. 
Kitchen  vs.  Loudenback,  48  Oh.  St.  377,  26  N.  E.  979,  29  Am. 

S.  R.  540. 
Johnson  vs.  Way,  27  Oh.  St.  374. 
Kavanagh  vs.  Bk.  of  America,  239  111.  404,  88  N.  E.  171. 

24.     L3i;le  vs.  Lansing,  147  U.  S.  59,  71,  13  S.  Ct.  254,  37  L.  Ed.  78. 
In  re  Stanford  Clothing  Co..  187  Fed.  172. 
In  re  Hopper-Morgan  Co.,  156  Fed.,  525, 19  Am.  Bankr.  R.  518. 


§58  RIGHTS   OF   HOLDER  105 

lation  of  statute  law,  a  (iiiestion  upon  which,  however,  tne 
decisions  are  conflicting.^^    (Sec.  23.) 

Wten  subject  to  "Sec.  58.  In  the  hands  of  any  hold- 
original  defenses.  ^^  other  than  a  holder  in  due  course,  a 
"Illinois,  Wis-     negotiable  instrument  is  subject  to  the 

bA^^lf'  same    defenses    AS    IF    IT    WERE    NON-NEGO- 

Alabama.  tiable.     But  a  holder  who  derives  his 

TITLE  through  A  HOLDER  IN  DUE  COURSE,  AND  WHO  IS  NOT 
HIMSELF  A  PARTY  TO  ANY  FRAUD"  OR  ILLEGALITY  AFFECTING 
THE  INSTRUMENT,  HAS  ALL  THE  RIGHTS  OF  SUCH''  FORMER 
HOLDER  IN  RESPECT  OF  ALL  PARTIES   PRIOR  TO   THE  LATTER". ' ' 

The  defenses  which  the  original  parties  to  an  instru- 
ment, as  the  maker  and  payee  of  a  promissory  note,  can 
make  among  themselves  are  called  "original  defenses" 
and  a  negotiable  instrument  is  always  subject  to  these 
while  in  the  hands  of  the  original  parties,  to  the  same  ex- 
tent that  an  instrument  would  be  which  is  not  negotiable. 
Any  holder  other  than  a  holder  in  due  course,  also  takes 
the  instrument  subject  to  these  defenses.  But  a  holder 
who  is  not  a  holder  in  due  course,  having  acquired  his 
title  through  a  holder  in  due  course  and  not  himself 
a  party  to  any  fraud  or  any  of  the  other  infirmities  which 
affect  the  instrument  as  provided  in  Sees.  55  and  56,  ob- 
tains with  the  transfer  to  him  through  the  holder  in  due 
course,  all  the  rights  which  that  holder  had  against  par- 
ties who  signed  the  instrument  before  he  became  a  party 
to  it.  By  the  transfer  to  a  holder  in  due  course  the  char- 
acter of  the  instrument  as  an  available  security  became 
established.  The  subsequent  transferee,  therefore,  even 
though  he  purchase  with  notice,  acquires  all  the  rights 
of  the  holder  in  due  course  and  is  himself  so  considered. 
He  can  stand  on  that  holder's  title  and  enforce  the  in- 

25.     Alexander  vs.  Hazelrigsc,  123  K3^  677.  ^ 

Citizens  Bk.  vs.  Crittenden  Record  Press.  loO  Ky.  t)34. 
Sabine  vs.  Paine,  166  App.  Div.  (N.  Y.)  9. 
Schlessinger  vs.  Kelly,  114  App.  Div.   (N.  Y.)  546. 
Schlesinger  vs.  Lehmeier,  191  N.  Y.  69. 


106  THE  NEGOTIABLE  INSTRUMENTS  LAAV         §  59 

strument  against  all  parties  who  became  parties  prior  to 
that  holder  in  due  course  through  whom  he  acquired  his 
title.-« 

Who  deemed  ''Sec.    59.     Every    holdee    is    deemed 

holder  in  due        prima  facie  to  be  a  holder  in  due  course; 

^^^'^^^^  BUT  WHEN  IT  IS  SHOWN  THAT  THE  TITLE  OF 

ANY  PERSON  W^HO  HAS  NEGOTIATED  THE  INSTRUMENT  WAS  DE- 
FECTIVE, THE  BURDEN  IS  ON  THE  HOLDER  TO  PROVE  THAT  HE 
OR  SOME  PERSON  UNDER  WHOM  HE  CLAIMS  ACQUIRED  THE 
TITLE  AS  A  HOLDER  IN  DUE  COURSE.  BuT  THE  LAST  MEN- 
TIONED RULE  DOES  NOT  APPLY  IN  FAVOR  OF  A  PARTY  WHO  BE- 
CAME BOUND  ON  THE  INSTRUMENT  PRIOR  TO  THE  ACQUISI- 
TION  OF  SUCH   DEFECTIVE   TITLE." 

Every  holder  of  an  instrument  is  considered  to  be  a 
holder  in  due  course  until  the  contrary  is  shown  to  be 
true.  And  when  it  is  sho^\Ti  that  the  title  was  defective 
in  the  hands  of  any  person  who  negotiated  the  instru- 
ment it  is  made  the  duty  of  that  one  seeking  its  enforce- 
ment to  meet  and  overcome  the  proof  offered  and  to  show 
that  either  he  himself  or  some  other  person  under  whom 
he  claims  became  a  holder  in  due  course,  that  is,  acquired 
the  instrument  under  the  circumstances  and  free  from 
the  imperfections  affecting  the  title  which  are  enumer- 
ated in  Sec.  55.  The  holder  cannot  be  required  to  furnish 
this  proof  and  his  position  cannot  be  assailed,  however, 
by  any  one  who  became  a  party  to  the  instrument  before 
the  alleged  defect  in  the  title  occurred.  Such  person  is 
not  concerned  with  imperfections  occurring  after  he  be- 
came a  party  to  the  instrument  and  cannot  take  advan- 
tage of  them. 

A\Tien  the  instrument  concerning  which  inquiry  is 
made  to  determine  the  holder's  qualification  as  a  holder 

26.     Comstock  vs.  Buckley,  141  Wis.  228.  233,  123  S.  W.  415,  135 
Am.  S.  R.  34. 
Cover  vs.  Mvers.  75  Md.  406. 

Black  vs.  1st  Natl.  Bk.  Westminister.  96  Md.  399. 
McMuiTav  vs.  McMun-av,  258  Mo.  405,  417. 
Horan  vs.  Mason,  141  App.  Div.   (N.  Y.)  89. 


§59  RIGHTS   OF  HOLDER  107 

in  due  course  is  one  payable  on  demand,  another  ele- 
ment which,  however,  does  not  concern  title,  must  be  con- 
sidered. It  is  as  to  the  time  at  which  the  holder  ac- 
quired the  instrument  and  if  it  is  shown  that  he  ac- 
quired it  an  unreasonable  length  of  time  after  its  issue, 
or  last  negotiation,  if  a  bill,  he  will  not  be  considered  to 
be  a  holder  in  due  course.    (Sec.  53.) 

Upon  tlie  question  whether  or  not  the  payee  is  ever  to 
be  considered  a  holder  in  due  course  it  has  not  been  pos- 
sible to  determine  with  any  degree  of  assurance  from  the 
decisions  interpreting  the  Act,  whether  he  is  or  is  not 
to  be  regarded  as  such  a  holder.  Perhaps  it  may  be  best 
said  that  he  is  not  in  all  cases,  but  it  seems  to  be  reason- 
ably well  established  that  the  payee  of  an  instrument  is- 
sued to  him  as  the  creditor  of  a  person  to  whom  the 
maker  is  indebted  is  to  be  regarded  as  a  bona  fide  pur- 
chaser, holder  in  due  course,  and  that  the  instrument  in 
his  hands  is  not  subject  to  defenses  ordinarily  available 
between  original  parties.  In  the  cases,  this  conclusion  is 
reached  by  regarding  him  in  the  position  he  Avould  oc- 
cupy if  he  had  received  the  instrument  b;v  indorsement 
from  the  creditor.^" 

An  examination  of  the  cases  cited  will  reveal  that  the 
question  of  the  payee's  status  as  a  holder  in  due  course 
always  arises  upon  instruments  on  which  there  are  either 
plural  primary  parties,  or  such  as  have  been  indorsed 
for  accommodation.  Upon  such  instruments  it  has  been 
urged  with  success  in  some  jurisdictions  that  the  payee 
can  never  be  a  holder  in  due  course  and  take  the  instru- 

27.     Lamson  vs.  Beard.  fl4  Fed.  30,  39,  36  C.  C.  A.  56,  45  L.  R.  A. 

822. 

So.  Boston  Iron  Co.  vs.  Brown,  63  Me.  139. 

Cagle  vs.  Lane,  49  Ark.  465,  5  S.  W.  790. 

City  of  Adrian  vs.  Whitney  Center  Natl.  Bk.,  180  Mich.  171. 

Regester's  Sons  Co.  vs.  Reed,  185  Mass.  226. 


108  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  59 

ment  free  from  the  original  defenses. ^^  In  others  it  is 
held,  and  it  seems  to  me  with  the  better  reason,  that  if 
the  payee  takes  the  instrument  at  its  initial  delivery  with- 
out any  notice  of  equities  existing  between  its  other  par- 
ties he  is,  by  virtue  of  this  section  and  of  Section  55  a 
holder  in  due  course.^^ 

28.  St.  Charles  Savgs.  Bk.  vs.  Edwards,  243  Mo.  553. 
Builders  Lime   &   Ceni.   Co.   vs.   Weimer,   170  Iowa,  444,  161 

N.  W.  100. 

29.  Liberty  Trust  Co.  vs.  Tilton,  217  Mass.  462. 
Brown  vs.  Rowan,  154  N.  Y.  S.  1098. 

Ex  Parte  Goldberg  &  L.,  191  Ala.  356,  67  So.  839,  L.  R. 
A.  1915  F.  1159. 


60  LIABILITIES  OF  PARTIES  109 


SUBDIVISION  V, 


Liabilities  of  Parties. 

Sect: 

Lou 

Sect 

ion 

60 

Liability  of  maker. 

65 

Warranty   where   negotiation 

61 

Liability  of  drawer. 

66 

by  delivery,  etc. 
Liability  of  general  indorser. 

62 

Liability  of  acceptor. 

67 

Liability  of  general  indorser 

63 

When     person     deemed 

in- 

where   paper  is   negotiable 

dorser. 

by  deliverj^ 

(iS 

Order  in  which  indorsers  are 

64 

Liability     of     in-egular 

in- 

liable. 

dorser. 

69 

Liability  of  agent  or  broker. 

The  parties  to  a  negotiable  instrument,  to  whom  lia- 
bility attaches,  are  classified  as  the  maker,  the  drawer, 
the  acceptor  and  the  indorser.  All  persons  Avho  assume  a 
liability  upon  the  instrument  become  parties  as  one  of 
these,  unless  by  words  of  special  qualification  they  as- 
sume a  different  liability  upon  it.  Their  liability  is  in  the 
nature  of  a  contract  and  like  any  other  contract  it  is  to 
be  interpreted  in  accordance  with  the  language  used  in 
the  instrument  (see  Sec.  10).  Whether  expressed  or  not, 
however,  certain  liabilities  attach  to  the  parties  to  a  ne- 
gotiable instrument  and  what  these  are  and  what  admis- 
sions are  deemed  to  be  implied  from  their  signatures 
are  provided  in  this  and  the  following  nine  sections  of 
the  Act. 

Liability  of  ''Sec.  60.     The  maker  of  a  negotiable 

maker.  instrument  by  making  it  engages  that 

HE   WILL  PAY  IT  ACCORDING  TO   ITS  TENOR,   AND   ADMITS   THE 
EXISTENCE  OF  THE  PAYEE  AND  HIS  THEN  CAPACITY  TO  INDORSE. 

The  maker  of  a  promissory  note  agrees  that  he  will 
pay  the  instrument  according  to  its  tenor,  that  is,  ac- 
cording to  the  manner  in  which  he  states  in  the  instru- 
ment that  he  will  do  so.    By  placing  his  signature  upon 


110  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  61 

the  instrument  payable  to  a  named  payee  or  his  order  he 
admits,  by  that  act  alone,  that  the  payee  whom  he  names 
has  a  legal  existence^  and  then  has  the  right  and  the  legal 
capacity  to  indorse  it,  which  means  that  he  is  not  under 
any  legal  disability  that  would  render  him  incompetent 
to  indorse  the  instrument,^  and,  if  the  instrument  is  ne- 
gotiated into  the  hands  of  a  holder  for  value,  the  maker 
cannot  afterward  deny  either  of  these  admissions  (Sec. 
57).  He  usually  signs  the  instrument  upon  its  face  but  if 
his  signature  appears  elsewhere  with  identifying  words, 
or  if  it  can  be  determined  from  the  context  of  the  instru- 
ment that  he  intended  to  sign  as  an  original  promisor, 
he  will  be  liable  as  maker.^ 

Liability    of  ,.g  g-^        rpjjj,  DRA^vER  BY  DRAWING  THE 

drawer. 

^Illinois  INSTRUMENT  ADMITS  THE  EXISTENCE  OF  THE 

Colorado.  PAYEE  AND  HIS  THEN   CAPACITY  TO  INDORSE; 

AND  ENGAGES  THAT  ON  DUE  PRESENTMENT  THE  INSTRUMENT 
WILL  BE  ACCEPTED  AND  PAID,  OR  BOTH,  ACCORDING  TO  ITS 
TENOR,  AND  THAT  IF  IT  BE  DISHONORED,  AND  THE  NECESSARY 
PROCEEDINGS  ON  DISHONOR  BE  DULY  TAKEN,  HE  WILL  PAY  THE 
AMOUNT  THEREOF  TO  THE  HOLDER,  OR  TO  ANY  SUBSEQUENT^ 
INDORSER  WHO  MAY  BE  COMPELLED  TO  PAY  IT,  BUT  THE  DRAW- 
ER MAY  INSERT  IN  THE  INSTRUMENT  AN  EXPRESS  STIPULATION 
NEGATIVING  OR  LIMITING  HIS  OWN  LIABILITY  TO  THE  HOLDER. 

The  drawer  of  a  bill  of  exchange  by  the  act  of  draw- 
ing and  issuing  the  bill,  like  the  maker  of  a  promissory 
note,  (Sec.  60),  impliedly  admits  that  the  payee  he  names 
exists  and  at  the  time  of  the  delivery  of  the  bill  to  him  has 
the  right  to  indorse  it  and  is  under  no  legal  disability 
which  would  prevent  him  from  doing  so.  He  also  en- 
gages by  the  act  of  drawing  the  bill  that  the  person  upon 
whom  he  draws  will  either  accept  or  pay  the  instrument 
according  to  its  terms  and  effect,  or  do  both,  when  it  is 

1.  Mex.  Asph.  Pav.  Co.  vs.  Love,  73  111.  A.  250. 

2.  Bank  of  Commerce  vs.  Rogers,  23  Ont.  L.  (Canada)  109. 
Smith  vs.    Marsaek,  6  C.  B.  (Eng.)  486. 

3.  White  vs.  HoAvland,  9  Mass.  314,  6  Am.  Dec.  71. 


§  62  LIABILITIES  OF  PARTIES  111 

duly  presented  to  him.  In  addition  to  this,  lie  agrees  by 
the  act  of  drawing  that  if  the  bill  is  not  accepted  or  paid 
by  the  drawee  and  it  thereby  becomes  dishonored,  and  if 
the  necessary  proceedings  to  charge  him  are  taken  as  re- 
quired by  other  provisions  of  this  Act  (Sees.  89  to  118), 
upon  its  dishonor,  he  will  then  himself  pay  the  amount 
called  for  by  the  bill  to  the  holder,  or  to  any  indorser  who 
may  have  been  ol)liged  to  pay  it. 

This  promise  is  termed  an  implied  promise  for  the 
reason  that  it  is  understood  and  agreed  to  by  the  drawer 
by  the  act  of  drawing  and  issuing  the  bill  quite  as  effect- 
ually as  though  it  were  expressed  in  the  language  of  the 
instrument.  Though  there  is  no  provision  in  this  sec- 
tion or  elsewhere  in  the  Act  to  the  effect  that  the  drawer 
of  a  bill  or  check,  by  the  act  of  drawing,  admits  his  in- 
debtedness to  the  payee  in  at  least  the  sum  for  which  the 
bill  is  drawn,  the  fact  that  he  does  so  is  firmly  estab- 
lished.'^ 

The  drawer  may  write  upon  the  bill  any  words  indicat- 
ing that  he  does  not  undertake  or  agree  to  the  promises 
which  are  implied  from  the  nature  of  the  instrument  he 
signs  and  if  he  does  so,  or  writes  other  words  which  lim- 
it or  qualify  his  liability  to  the  holder,  he  cannot  be  held 
to  any  greater  liability  than  that  to  which  he  limits  him- 
self. 

Liability    of  ''SeO.   62.       The  ACCEPTOR  BY   ACCEPTING 

acceptor.  ^^^^   instrument  engages   that   he   will 

Missouri,  pay  tt  according  to  the  tenor  of  his  ac- 

ceptance AND  ADMITS  : 

1 .  The  existence  of  the  drawer,  the  genuineness  of 

his  signature,  and   his  CAPACITY''  AND  AUTHORITY    TO   DRAW 

the  instrument  and 

2.  The  existence  of  the  payee  and  his''  then  ca- 
pacity  to  indorse. 

4.     McKenzie  vs.  Barrett.  148  111.  A.  414. 


112  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  62 

The  person  who  is  named  in  the  bill  as  the  one  upon 
whom  it  is  drawn  and  who  is  to  indicate  when  it  is  pre- 
sented to  him  whether  or  not  he  will  pay  it  at  its  matur- 
ity is,  before  acceptance,  called  the  drawee.  Upon  ac- 
ceptance of  the  instrument  he  becomes  the  acceptor.  By 
his  acceptance  he  admits  everything  essential  to  the  va- 
lidity of  the  bill,^  and  promises  to  pay  it  according  to  its 
terms  and  according  to  the  purport  and  effect  of  his  ac- 
ceptance, even  if  he  has  no  funds  of  the  drawer  in  his 
hands  at  its  maturity.*^  If  the  bill  is  payable  at  a  time 
after  sight  and  the  drawee  intends  to  pay  it,  he  is  re- 
quired to  write  his  acceptance  and  sign  it  and  he  usually 
does  this  by  writing  his  name  upon  the  instrument  with 
words  above  it  indicating  that  he  assents  to  the  drawer's 
order.     (Sec.  132,  133.) 

By  this  act  he  promises  and  agrees  just  as  fully  as 
though  it  were  expressed  in  words  in  the  language  of  the 
bill,  that  he  will  pay  the  instrument  according  to  the  tenor 
of  his  acceptance  on  the  day  when  it  becomes  due.  The 
act  of  accepting  is  also  his  admission  that  the  drawer 
exists,  that  the  latter  had  the  right  and  the  power  to  draw 
the  instrument,  and  is  an  admission  that  the  person 
named  as  the  payee,  to  whom  the  instrument  is  to  be  paid, 
exists  and  has  the  right  and  the  power  to  indorse  the  bill. 
The  acceptor  cannot  afterward  deny  the  things  which  his 
acceptance  expressly  or  impliedly  admits  if  the  bill  is  in 
the  hands  of  a  holder  for  value  or  in  due  course."^  (Sec. 
570 

5.  Ragsdale  vs.  Gresham,  141  Ala.  308,  37  S.  367. 

6.  Jarvis  vs.  Wilson,  46  Conn.  90,  33  Am.  R.  18. 

7.  Smith  vs.  Marsack,  6  C.  B.  486. 

Natl.  Bank  of  Commerce  vs.  Amn.  Natl.  Bank,  148  Mo.  A.  1,. 

127  S.  W.  429. 
Rallo  Natl.  Bank  vs.  First  Nat.  Bank,  141  Mo.  A.  719,  125  S, 

W.  513. 
Meuer  vs.  Phenix  Nat.  Bank,  94  App.  Div.  (N.  T.)  331,  88  N. 

Y.  S.  83,  183  N.  Y.  511,  76  N.  E.  1100. 


§  63  LIABILITIES  OF  PARTIES  113 

This  section,  therefore,  in  some  jurisdictions,  effects  a 
very  substantial  change  in  the  law  in  one  important  re- 
spect. In  these,  if  a  bank  certifies  a  check  which  was 
fraudulently  issued  or  at  the  time  of  its  certification  had 
ibeen  fraudulently  raised,  it  now  is  obliged  to  pay  it  to  a 
subsequent  holder  in  due  course  in  the  amount  for  which 
it  certified,  regardless  of  the  amount  for  which  the  check 
was  originally  drawn  or  the  manner  in  which  it  was  ob- 
tained.    (Sec.  14.) 

Its  certification  is  by  Section  187  made  equivalent  to  an 
acceptance  which  it  is  by  this  section  required  to  pay  ac- 
cording to  its  tenor.  And,  of  course,  if  the  drawee  of  a 
bill  accepts  a  fraudulent  bill,  or  accepts  it  in  a  raised 
amount,  he  must  likewise  pay  a  subsequent  holder  in  due 
course  the  amount  for  which  he  accepted  the  bill,*  with- 
out regard  to  the  amount  for  which  it  was  originally 
drawn  (Sec.  14).  The  kinds  of  acceptances  which  may  be 
made  and  their  effect  upon  the  instrument  are  described 
in  subdivision  2  of  Title  II,  Sees.  132  to  142  inclusive. 

When  person  ' '  Sec  63.     A  person  placing  his  signa- 

deemed  indorser.  ^^rj^g    upon    an    instrument    otherwise 

THAN  4S  MAKER,  DRAWER  OR  ACCEPTOR,  IS  DEEMED  TO  BE  AN 
indorser,  U^^LESS  he  clearly  INDICATES  BY  APPROPRIATE 
WORDS  HIS  INTENTION  TO  BE  BOUND  IN  SOME  OTHER  CA- 
PACITY. ' ' 

Every  person  who  places  his  signature  upon  an  instru- 
ment otherA\dse  than  as  maker,  drawer,  or  acceptor,  is  an 
indorser  and  he  is  liable  upon  the  instrument  only  as 
such  unless  he  writes  at  his  signature  words  which  show 
that  he  intends  to  assume  some  other  liability  and  be 
bound  in  some  other  capacity,  as,  for  example,  maker, 
surety  or  guarantor.  Parol  evidence  is  not  admissible 
to  show  a  different  intention.^ 

8.  Espy  vs.  Bank  of  Cinti.,  18  Wall.  (U.  S.)  604. 

9.  Lio-ntner  vs.  Roach,  95  Atl.  (Md.)  62. 


114  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  64 

All  indorser  ma}'  qualify  his  indorsement  in  the  man- 
ner provided  in  Sec.  38,  and  he  may  assume  any  greater 
or  lesser  liability  than  that  of  indorser  by  using  Avords 
clearly  indicating  that  which  he  assumes,  or  he  may  in- 
dorse merely  for  identification,  in  which  case  he  incurs 
no  other  liability  upon  the  instrument  if  he  indicates  at 
his  signature  that  he  signs  only  for  the  purpose  of  iden- 
tifying the  presenter.^"  The  liability  of  an  indorser 
whose  signature  is  not  required  in  the  orderly  course  of 
the  negotiation  of  the  instrument  is  fixed  in  the  next  sec- 
tion. If  any  person  intending  to  become  an  indorser 
places  his  name  upon  .the  face  of  the  instrument  it  is  nec- 
essary that  he  use  words  indicating  that  he  signs  as  an 
indorser  or  he  may  thereby  assume  the  obligation  of  a 
primary  party,     (See  Sec.  31.) 

Liability  of  ''Sec.  64.    Wheee  a  person,  not  other- 

irregular  a\'ISe  a  party  to  ax  instrument,  places 

indorser.  thereon  his  signature  in  blank  before 

"Illinois.  delivery,  he  is  liable  as  indorsee  in  ac- 

cordance WITH  THE  FOLLOWING  RULES: 

1.  "If  the  INSTRUMENT  IS  PAYABLE  TO  THE  ORDER  OF  A 
THIRD  PERSON,  HE  IS  LIABLE  TO  THE  PAYEE  AND  TO  ALL  SUB- 
SEQUENT PARTIES. 

2.  "If  the  INSTRUMENT  IS  PAYABLE  TO  THE  ORDER  OF  THE 
MAKER  OR  DRAWER,  OR  IS  PAYABLE  TO  BEARER,  HE  IS  LIABLE  TO 
ALL  PARTIES  SUBSEQUENT  TO  THE  MAKER  OR  DRAWER. 

3.  If  HE  SIGNS  FOR  THE  ACCOMMODATION  OF  THE  PAYEE, 
HE  IS  LIABLE  TO  ALL  P.ARTIES  SUBSEQUENT  TO  THE  PAYEE. 

There  is  one  kind  of  indorser,  called  an  "irregular  in- 
dorser," who,  not  otherwise  being  a  party  to  an  instru- 
ment, places  his  signature  upon  it  in  blank  before  it  is 
delivered.  The  section  refers,  of  course,  to  the  delivery 
at  the  inception  of  the  instrument,  or,  if  the  instrument 
is  a  bill  to  its  delivery  at  that  time  or  at  the  delivery  of 


10.     American  Bank  vs.  Macondray,  4  Philippine,  695. 


§64  LIABILITIES  OF  PARTIES  115 

the  acceptance. ^^  This  indorser  is  referred  to  in  the  ex- 
planation of  the  preceding  section  as  the  indorser  whose 
signature  is  not  necessary  to  the  orderly  negotiation  of 
the  instrument,  and  he  is  known  also  as  an  accommoda- 
tion indorser.     (See  Sec.  29.) 

His  liability  upon  the  instrument  is  as  follows:  If 
he  places  his  signature  upon  an  instrument  payable  to 
the  order  of  a  third  person,  he  is  liable  to  the  payee  and 
to  all  parties  who  take  the  instrument  after  him.  If 
he  places  his  name  upon  an  instrument  payable  to 
bearer  or  payable  to  the  maker's  or  the  drawer's  own 
order,  he  is  liable  to  all  parties  who  subsequently  take 
the  instrument,  but  not  to  the  maker  or  drawer.  If  the 
irregular  indorser  signs  the  instrument  for  the  accom- 
modation of  the  person  named  as  payee,  he  is  not  liable 
to  the  payee  but  he  is  liable  to  all  parties  who  take  the 
instrument  after  that  party. 

Attention  is  directed  to  the  fact  that  by  the  literal  in- 
teri^retation  of  Sub-section  3  one  who  indorses  for  the  ac- 
commodation of  the  acceptor  of  a  bill  payable  to  the 
drawer's  own  order,  is  liable  only  to  holders  subsequent 
to  the  drawer-payee  and  not  to  the  drawer.  And  this  is 
so  notwithstanding  the  fact  that  he  became  a  party  to  the 
instrument  entirely  for  the  drawer's  security.  But  the 
courts  have  permitted  it  to  be  shown,  under  these  cir- 
cumstances, by  other  evidence,  aside  from  the  instrument 
itself,  that  the  accommodation  indorser  signed  for  the 
benefit  of  the  drawer-payee  and,  though  not  warranted 
by  the  language  of  the  sub-section,  they  hold  that  one 
who  indorses  for  the  accommodation  of  the  acceptor  is 


11.     Kolm  vs.  Consolidated  Butter,  etc.,  Co.,  30  Misc.  725,  63  N. 
y.  S.  265. 
Shelmerdine  vs.  Duft'y,  4  Mart.  N.  S.  (La.)  34. 
Wilson  vs.  Hendee,  74  N.  J.  LaAv,  640,  66  Atl.  413. 


116  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  65 

liable  to  the  drawer-payee  as  well  as  subsequent  parties.^^ 
(See  Sec.  68.) 

The  irregular  indorser  becomes  a  party  to  the  instru- 
ment for  the  purpose  of  lending  his  credit  and  worth  to 
the  value  of  the  instrument  to  which  he  would  not  other- 
wise have  been  a  party.  It  is  not  at  all  material,  how- 
ever, for  what  purpose  he  indorses  the  instrument,  if  he 
does  so,  and  if  he  would  not  otherwise  have  been  a  party 
to  it,  his  liability  is  as  fixed  in  this  section.^ ^  It  applies 
to  all  irregular  indorsers,  whether  for  accommodation  or 
otherwise,  and  it  includes  any  indorsement  in  blank  of 
any  person  whose  signature  is  not  required  in  the  due 
and  regular  negotiation  of  the  instrument,  and  all  those 
who  become  parties  before  deliver}^  and  have  heretofore 
been  variously  held  to  be,  maker,  surety,  guarantor  or 
indorser.  x\n  irregular  indorser  who  signs  as  surety  or 
guarantor,  naming  the  person  for  whom  he  is  surety  or 
guarantor,  and  with  other  words  descriptive  of  the  ca- 
pacity in  which  he  becomes  bound,  is  held  in  whatever 
obligation  he  assumes  (Sec.  63).  In  the  absence  of  words 
upon  the  instrument  indicating  any  other  capacity  in 
which  he  is  to  be  charged  he  will,  however,  be  held  to  the 
liability  of  an  irregular  indorser  and  it  may  not  be  shown 
by  extrinsic  evidence,  except  as  to  his  immediate  parties^ 
that  he  intended  to  bind  himself  in  any  other. 

Warranty  where  "^^C'  ^^-  ^^^^^  ^^^^^^  negotiating 
negotiation  by  ^^  instrument  by  delivery  or  by  a  quali- 
delivery,  etc.         fied  indorsement  warrants: 

1.  That  the  instrument  is  genuine  and  in  all  re- 
spects what  it  purports  to  be; 

2.  That  he  has  a  good  title  to  it; 

12.  Haddock  B.  &  Co.  vs.  Haddock,  192  N.  Y.  499,  19  L.  R.  A. 

(N.  S.)  136  and  note. 

13.  Holland  Trust  Co.  vs.  Waddell,  75  Hun.  104,  2G  N.  Y.  S.  980, 

151  N.  Y.  S.  666,  46  N.  E.  1148. 
Chicago  Title,  etc.,  Co.  vs.  Brady,  165  Mo.  197,  65  S.  W.  303. 


§65  LIABILITIES  OF  PAKTIES  117 

3.  That  all  prioe  pabties  had  capacity  to  conteact  ; 

4.  That  he  has  no  knowledge  of  any  fact  which 
would  impair  the  validitit  of  the  instrument  or  ren- 
der it  valueless. 

But   WHEN   THE   NEGOTIATION    IS   BY   DELI\T:RY    ONLY,    THE 

warranty  extends  in  favor  of  no  holder  other  than 
the  imjmediate  transferee. 

The  pbiOvisions  of  paragraph  numbered  three  of  this 

SECTION   do    not  APPLY   TO   PERSONS   NEGOTIATING   PUBLIC    OR 
CORPORATE    SECURITIES,    OTHER    THAN    BILLS    AND    NOTES." 

A  warranty  is  a  representation  either  expressed  or  im- 
plied that  the  thing  warranted  is  really  what  it  appears 
and  is  represented  to  be,  and  a  person  who  negotiates  an 
instrument  by  delivery  w^ithout  indorsement  or  by  quali- 
fied indorsement  (without  recourse  see  Sec.  38),  is  held 
to  the  warranties  expressed  in  this  section.  While  not 
liable  upon  the  instrument  as  one  Avould  be  who  indorses 
without  qualification,  the  person  negotiating  the  instru- 
ment by  delivery  or  this  form  of  indorsement  can  be  held 
for  any  failure  of  his  warranty,  and  he  may  be  sued  for 
its  breach  independently  of  any  action  upon  the  instru- 
ment. 

He  warrants  by  his  qualified  indorsement,  or  by  deliv- 
ery, that  his  title  to  the  instrument  is  good,  and  if  it 
proves  to  be  defective  he  will  be  required  to  make  good 
any  loss  which  may  result  from  its  failure.  He  also  war- 
rants by  delivery  or  by  this  form  of  indorsement  that  all 
parties  to  the  instrument  who  became  parties  prior  to 
himself  had  the  legal  capacity  to  and  were  able  lawfully 
to  become  parties  to  be  bound  upon  the  contract  in  the 
manner  in  which  -they  signed  it.^^  He  does  not  warrant 
that  the  instrument  is  a  valid  and  subsisting  contract,  as 
one  does  who  indorses  without  qualification,  but  war- 

14.     Leonard  vs.  Draper,  187  Mass.  536,  73  N.  E.  644.        ^    ^^   ^ 
Glidden  vs.  Chamberlin,  167  Mass.  486,  46  N.  E.  103,  57  Am. 
S.  Rep.  479  and  note. 


118  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  66 

rants  merely  that  he  does  not  know  of  any  fact  or  thing 
which  would  make  the  instrument  less  valid  than  it  ap- 
pears to  be,  or  which  would  make  it  of  no  value.  Thus  it 
has  been  held  that  the  transferee  of  a  note  may  recover 
from  the  seller  the  consideration  paid  for  the  instrument 
if  the  latter  knew  at  the  time  of  the  transfer  that  the 
parties  to  it  were  actually  insolvent  and  concealed  that 
fact  from  him.^^  One  w^ho  negotiates  the  instrument  by 
qualified  indorsement  warrants  also  that  the  instrument 
and  all  prior  signatures  are  genuine,  that  is,  that  it  is 
not  a  forged  instruments^  and  that  all  parties  who  signed 
it  prior  to  its  negotiation  by  him  were  capable  of  enter- 
ing into  a  legal  and  enforceable  contract. 

A  qualified  indorser  impliedly  makes  these  warranties 
to  all  persons  who  become  parties  to  the  instrument  after 
his  indorsement,  but  one  who  transfers  the  instrument 
by  mere  delivery  without  indorsement,  can  be  held  to 
them  only  by  the  person  to  whom  he  has  transferred  it. 

The  warranty  that  all  prior  parties  had  the  capacity  to 
contract  upon  the  instrument  applies  only  to  the  negotia- 
tion of  bills  of  exchange,  promissory  notes  and  checks 
of  corporations  but  does  not  apply  to  public  or  corpora- 
tion bonds  or  other  securities.  You  will  observe  from  the 
next  section  that  the  liability  of  general  indorsers  differs 
very  materially  from  that  of  parties  who  negotiate  by 
qualified  indorsement  or  by  mere  delivery. 
Liability  of  ''Sec.    66.      Eveky   indorser"   m^ho   in- 

general   indorser.  dorses  without  qualification,  warrants 
"Illinois.  to  all  subsequent  holders  in  due  course  : 

1.  The  matters  and  things  mentioned  in  paragraphs 
numbered  one,  two  and  three  of  the  next  preceding  sec- 
tion ;  and 

15.  Leonard  vs.  Draper,  187  Mass.  536,  73  N.  E.  044. 
Bursfess  vs.  Chapin.  5  R.  I.  225. 

Gordon  vs.  Irvine,  105  Ga.  144.  3  S.  E.  151. 

16.  Lennon  vs.  Gnnicr,  159  N.  Y.  433,  54  N.  E.  11. 

Farmers   Natl.    Bank   vs.    Farmers,   etc.,   Bank,   159   Kv.   141, 
166  S.  W.  986. 


§66  LIABILITIES  OF  PARTIES  119 

2.     That  the  instrument  is  at  the  time  of  his  in- 
dorsement VALID  AND  SUBSISTING. 

And,  in  addition,  he  engages  that  on  due  present- 
ment, IT  shall,  be  accepted  or  paid,  or  both,  as  the  case 

MAY  be,  according  TO  ITS  TENOR,  AND  THAT  IF  IT  BE  DIS- 
HONORED, AND  THE  NECESSARY  PROCEEDINGS  ON  DISHONOR  BE 
DULY  TAKEN,  HE  WILL  PAY  THE  AMOUNT  THEREOF  TO  THE 
HOLDER,  OR  TO  ANY  SUBSEQUENT  INDORSER  WHO  MAY  BE  COM- 
PELLED TO  PAY  IT." 

General  indorsers  are  all  who  indorse  without  qualifi- 
cation (Sec.  38),  including  those  who  indorse  restric- 
tively,  as  for  collection.  They  are  bound  to  subsequent 
holders  in  due  course  by  the  warranties  prescribed  in 
Sub-sections  1,  2  and  3  of  the  preceding  section,  and 
more.  Their  warranty  as  to  the  validity  of  the  instru- 
ment is  broader  than  the  warranty  of  one  who  qualifies 
his  indorsement,  or  that  of  a  person  not  an  indorser  who 
negotiates  the  instrument  by  delivery,  for  they  warrant 
not  only  that  the  instrument  is  what  it  purports  to  be, 
and  not  only  that  they  do  not  know  of  anything  affecting 
its  validity  and  that  all  prior  parties  had  the  capacity  to 
enter  into  a  legal  and  enforceable  contract,  but  warrant 
that  the  instrument  which  they  indorse  is  valid  and  in 
force  and  has  effect  as  .a  legal  and  enforceable  nego- 
tiable instrument  at  the  time  they  indorse  it.^*^  Except 
in  such  States  as  have  changed  this  section  in  respect  to 
accommodation  parties,  every  accommodation  indorser 
engages  in  the  same  warranties  as  a  general  indorser. 
It  has  been  held  that  these  warranties,  by  the  accommo- 
dation indorser  do  not  extend  to  the  party  who  first  dis- 
counts the  accommodation  instruments^  but  he  is  in- 
cluded in  their  engagement  to  pay  the  instrument  if  it  is 
dishonored. 


17.  Crosby  vs.  Wright,  70  Minn.  251. 

18.  Bouck  vs.  Lambeck,  63  Misc.  (N.  Y.)  117, 118  N.  Y.  S.  494. 


120  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  66 

A  collecting  bank  which  endorses  the  instrument  for 
collection  is  bound  by  these  warranties  and  is  in  all  re- 
spects liable  as  an  indorser  unless  it  uses  words  of  qual- 
ification Avhich  negative  this  liability.  In  this  respect 
this  section  of  the  Act  was  intended  to  and  does  effect  an 
important  change  in  the  law  as  it  was  formerly  inter- 
preted in  some  States^ '^  and  now  makes  unnecessary  the 
written  guaranty  of  prior  indorsements  which  banks 
usually  stamp  upon  these  items  when  they  forward  them 
for  collection  to  their  correspondents,  or  which  are  to  be 
collected  through  the  clearing  house.  This  warranty  is 
now  implied  from  their  indorsement  for  collection  with- 
out additional  words. 19rt 

Besides  engaging  in  the  warranties  set  forth  in  this 
and  in  the  preceding  section,  a  general  indorser,  includ- 
ing an  accommodation  indorser,  and  one  indorsing  re- 
strictively,  imj)liedly  promises  and  agrees  by  his  act  of 
indorsing  the  instrument  that  upon  presentment  in  due 
and  proper  time  to  the  right  person,  at  the  right  place, 
it  will  be  accepted  or  paid  in  accordance  with  its  pur- 
port and  effect.  He  further  engages  that  if  it  is  not  so 
accepted  or  paid,  or  both,  and  if  all  necessary  steps  are 
taken  by  the  holder  in  proceedings  upon  dishonor  to 
charge  him,  as  is  provided  in  this  Act  (Sections  70  to 
118,  inclusive),  he  will  immediately  pay  the  amount  of 
the  instrument  to  the  holder  or  to  any  indorser  subse- 
quent to  himself  who  may  be  obliged  to  pay  it.  It  is  by 
reason  of  this  engagement  that  the  holder  is  not  required 

19.     First  Nat.  Bk.  of  Belmont  vs.  First  Nat.  Bk.  of  Barnesville. 

58  0.  S.  207. 
United  States  vs.  Am.  Exclianije  Natl.  Bank,  70  Fed.  232. 
Natl.  Park  Bank  vs.  Seaboard  Bank,  114  N.  Y.  28,  20  N.  E 

632,  11  Am.  S.  R.  612. 
Northwestern!  Natl.  Bank  vs.  Kansas  Citv  Bank  of  Conunerct 

107  Mo.  402,  17  S.  W.  982,  15  L.  R.  A.  102. 

19a.  Interstate  Trust  Co.  vs.  U.  S.  Natl.  Bank    (Colo.),  185 
Pac.  260. 


§67,68  LIABILITIES  OF  PARTIES  121 

upon  dishonor  to  first  resort  to  the  parties  primarily  lia- 
ble upon  the  instrument. 

T.  ,.,-4™     *  "Sec.  67.     Where  a  person  places  his 

Liability  of 

indorser  where     ixdoesement  on  an  instrument  negotia- 

paper  negotiable  ble  by  delivery  he  incurs  all  the  liabili- 

by  delivery.  ties  of  an  indorser." 

A  negotiable  instrument  payable  to  bearer,  being 
transferable  by  mere  delivery,  requires  no  indorsement, 
but  any  person  who  does  indorse  such  an  instrument  as- 
sumes and  incurs  all  of  the  liabilities  of  an  indorser  and, 
according  to  the  character  of  his  indorsement,  his  liabil- 
ity will  be  as  fixed  in  the  two  preceding  sections. 

Upon  dishonor  of  a  bearer  instrument  which  has  been 
indorsed,  the  same  proceedings  must  be  observed  in  or- 
der to  charge  an  indorser  as  are  required  upon  an  instru- 
ment payable  to  order  bearing  indorsements.  These  will 
be  found  in  the  next  subdivision  of  the  Act.  If  he  has 
indorsed  specially  his  liability  is  limited,  however,  to 
only  such  holders  as  make  title  through  his  indorsement. 
(Sec.  40.) 

Order  in  which  "Sec.  68.  As  respects  one  another, 
indorsers  are  indorsers  are  liable  prima  facie  in  the 
liable.  order  in  which  they  indorse;  but  e\t:- 

oHlinois.  dence  is  admissible  to  show  that  as  be- 

tween OR  among  themselves  they  ha^'te  agreed  other- 
wise.   Joint  payees  or  joint  indorsees  who  indorse  are 

deemed  to  indorse  JOINTLY'  AND  SEVERALLY'."" 

An  instrument  which  passes  from  one  person  to  an- 
other, receives  indorsement  at  different  times  from  the 
holders  who  negotiate  it.  Their  names  appear  upon  the 
instrument  in  the  order  in  which  it  was  held.  Upon  en- 
forcement of  the  indorser 's  liability  they  are  all  liable 
to  the  holder  but  in  their  relation  to  one  another,  they 
are  liable  in  the  order  in  which  they  signed  the  instru- 
ment. This  is  the  prima  facie  order  of  their  liability,  but 
they  are  permitted  to  show  that  as  between  or  among 
themselves  they  have  agreed  to  be  otherwise  bound.  The 


122  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  68 

instrument  usually  shows  in  what  order  the  indorsers 
are  to  be  held  among  themselves  and  it  is  important  and 
proper  that  each  place  his  name  immediately  after  the 
name  of  the  person  from  whom  he  acquired  it  in  order 
that  his  position  in  the  order  of  liability  may  be  readily 
ascertained,  unless,  by  agreement,  the  order  of  his  lia- 
bility is  to  be  fixed  by  a  different  position  upon  the  paper. 
The  position  of  an  indorser's  name  or  the  order  in  which 
he  signed  does  not  in  the  least  affect  the  holder's  right 
of  action  against  liim  upon  dishonor  of  the  instrument, 
but  is  of  importance  to  determine  the  liability  of  the  in- 
dorsers to  each  other.  The  holder  may  sue  any  indorser 
or  all  and  by  statutory  provision  may  join  primary  and 
secondary  parties  in  one  action  upon  the  instruments*^ 
including  the  personal  representative  of  any  who  may 
have  died. 

Payees  and  indorsers  who  place  their  names  upon  an 
instrument  at  the  same  time  with  the  intention  of  making 
themselves  joint  indorsers  are  severally  as  well  as  jointly 
liable  to  a  subsequent  holder.-^  This  liability  is  called 
joint  and  several.  Between  themselves  they  are  equally 
liable  and  one  paying  for  all  may  have  contribution  from 
the  others,  that  is,  he  can  recover  from  the  others  the 
part  which  each  ought  to  pay  unless  a  different  liability 
is  fixed  by  agreement.  (See  Accommodation  In- 
dorser.) This  need  not  be  shown  by  an  express  agree- 
ment but  may  be  made  to  appear  or  be  inferred  from 
the  circumstances  of  the  occasion  for  their  endorsements 
and  it  may  be  shown  by  parol  evidence. ^^ 

20.  Bnrdette  vs.  Bartlett,  95  U.  S.  637,  24  L.  Ed.  534. 
Knoxvillc  Bank  &  Tn;st  Co.  vs.  Mershon,  152  Ky.  169. 
Maddox  vs.  Duncan,  143  Mo.  613,  45  S.  W.  688. 
Curtis  vs.  Davidson,  215  N.  Y.  395,  109  N.  E.  481. 

21.  Trejro  vs.  Cunninghman,  267  111.  367,  108  N.  E.  350. 

22.  Goldman  vs.  Goldberger,  208  Fed.  877. 


§  69  LIABILITIES  OF  PARTIES  123 

Liability  of  an  "Sec.  69.     ''Wheee  a  broker  or  other 

agent  or  broker,  agent  negotiates  an  instrument  without 
"Illinois.  indorsement,  he  incurs  all  the  liabili- 

ties PRESCRIBED  BY  SECTION  66  OF  THIS  ACT,  UNLESS  HE  DIS- 
CLOSES THE  NAME  OF  HIS  PRINCIPAL,  AND  THE  FACT  THAT  HE 
IS  ACTING  ONLY  AS  AN  AGENT.'' 

This  section  determines  the  liability  of  an  agent  who 
negotiates  an  instrument  without  indorsement.  Sections 
19,  20  and  21  fix  his  liability  when  he  negotiates  the  in- 
strument by  indorsement  and  Section  44  prescribes  the 
manner  in  which  one  who  is  under  obligation  to  indorse 
an  instrument  in  any  representative  capacity  may  do  so 
if  he  does  not  intend  to  assume  personal  liability  upon  it. 
The  liabilities  prescribed  by  Section  65  are  those  which 
attach  to  a  party  who  negotiates  the  instrument  by  de- 
livery or  qualified  indorsement,  and  one  who  negotiates 
the  instrument  in  that  manner  impliedly  warrants  that 
the  instrument  is  genuine,  that  all  prior  parties  had  ca- 
pacity to  contract  and  that  he  knows  of  nothing  which 
would  impair  or  destroy  its  validity.  To  the  extent  pre- 
scribed in  that  section,  an  agent  or  broker  who  negoti- 
ates by  delivery  or  qualified  indorsement  also  becomes 
liable  upon  the  instrument,  unless  he  discloses  the  name 
of  his  principal  and  the  fact  that  he  is  acting  only  as  an 
agent. 


124  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  70 


SUBDIVISION  VI, 


Peesentment  for  Payment. 

Section  Section 

70  Effect  of  want  of  demand  on   80     Wlien  presentment  need  not 

principal  debtor.  be  made  to  cliarge  indorser. 

71  Presentment     where     instru-  g^     ^jien  delav  in  making  pre- 

ment  is  not  payable  on  de-  sentment  is  excused. 

mand    and    where   payable  on     ttti  a        i.  i. 

1  -,  ^  ''  82     When    presentment    may    be 

on  demand.  -,.  j       -ii 

TO     TTi    t  A -J.   4-  re  •     J.  dispensed  with. 

72  \\  hat     constitutes     suincient  ^ 

presentment.  ^^     When  instrument  dishonored 

73  Place  of  presentment.  by  non-pa}Tnent. 

74  Instrument  must  be  exhibited.  84    Liability  of  person  secondar- 

75  Presentment     where     instru-  ily  liable  when  instrument 

ment  payable  at  bank.  is  dishonored. 

76  Presentment  Avhere  principal   85     Time  of  maturity. 

^-    ^  is  dead.  ,.,,86     Time;  how  computed. 

1 1     Presentment  to  persons  liable  o-     t^  i       , 

as  partners  °'     nule  where  instrument  paya- 

78  Presentment  to  joint  debtors.  ^^^  ^*  b^^^- 

79  When   presentment  need  not   88     Wliat  constitutes  payment  in 

be  made  to  chaise  drawer.  due  course. 

The  object  of  presentment  for  payment  is  to  give  the 
person  primarily  liable  upon  the  instrument  the  oppor- 
tunity to  perform  his  part  of  the  contract  to  which  his 
signature  binds  him  and,  if  he  does  not  pay  it,  to  enable 
the  holder  to  give  notice  of  its  dishonor  to  secondary 
parties.  The  secondary  parties  have  impliedly  promised 
to  pay  only  if  those  primarily  liable  upon  the  instrument 
should  fail  to  do  so.  "Primary"  parties  are  those  who 
by  the  terms  of  the  instrument  are  absolutely  required  to 
pay  it;  all  others  are  "secondarily"  liable.  (Sec.  192.) 
These  cannot  be  held  to  this  promise  unless  the  instru- 
ment is  duly  and  properly  presented  and  pa^onent  is  de- 
manded of  the  person  whose  primary  obligation  it  is 
and  unless  notice  of  its  dishonor  is  at  once  given  to  them. 
Each  secondary  party  has  the  right  to  expect  that  the  in- 


§70  PRESENTMENT   FOR   PAYMENT  125 

strument  will  be  paid  at  maturity  and  if  it  becomes  dis- 
honored he  is  entitled,  except  in  certain  cases  which  will 
be  afterward  mentioned,  to  immediate  notice  of  its  dis- 
honor in  order  that  he  may  protect  himself  against  loss 
by  whatever  means  may  lie  in  his  power. 

A  holder  who  fails  to  use  all  necessary  care  in  this  re- 
gard is  deemed  to  be  guilty  of  negligence  and  it  fre- 
quently happens  that  secondary  parties  are  released 
from  liability  by  reason  of  his  carelessness.  But  as  the 
first  section  of  this  subdivision  provides,  the  party  pri- 
marily liable  upon  the  instrument,  such  as  the  maker  of 
a  note  or  acceptor  of  a  bill,  is  not  entitled  to  presentment 
and  notice  because  it  is  his  duty  to  remember  his  obli- 
gation and  pay  it  when  it  becomes  due  and  Ms  sig^la- 
ture  upon  the  instrument  imports  an  absolute  promise 
to  pay  it. 

Effect  of  want  of  ' '  Sec.  70.  Presentment  for  payment 
demand  on  prin-  jg  -^Qrj,  necessary  in  order  to  charge  the 
cipal  debtor.  person  primarily  liable  on  the  instru- 
Wisconsin.  ment;''  but  if  the  instrument  is,  by  its 

''Kansas,  New  terms,  payable  at  a  special  place,  and  he 
York,  Ohio.  jg  able  and  willing  to  pay  it  there  at  ma- 

turity,^ SUCH  ability  and  willingness  are  equivalent  to 
a  tender  of  payment  on  HIS  part.  But  except  as  herein 
otherwise  provided,  presentment,  for  payment,  is  neces- 
sary IN  order  to  charge  the  drawer  and  indorsers." 

The  person  primarily  liable  upon  a  promissory  note 
is  the  maker  and  presentment  for  payment  is  not  neces- 
sary to  charge  him.  Upon  a  bill  of  exchange  it  is  the  ac- 
ceptor and  his  liability  is  not  affected  by  the  holder's 
failure  to  present  the  instrument  for  payment.  The 
drawer  and  indorSer  of  the  bill  and  the  indorser  of  a 
note,  being  secondary  parties  w^hose  liability  does  not  be- 
come fixed  until  the  person  primarily  liable  upon  the  in- 
strument fails  to  pay  it,  presentment  for  payment  must 
be  made  in  order  to  charge  them. 


126  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  71 

If  the  bill  or  note  is  payable  at  a  place  named  therein, 
and  if  the  person  obliged  to  pay  it  is  able  and  willing 
to  pay  it  there  at  maturity  he  is  not  required  to  go  else- 
where to  make  payment.  The  fact  that  the  maker  or 
acceptor  has  provided  sufficient  funds  at  that  place  and 
is  able  and  willing  to  pay  it  there,  is,  of  itself,  considered 
to  be  the  equivalent  of  an  offer  by  him  to  do  so.  The 
next  section  provides  upon  what  day  presentment  for 
payment  must  be  made. 

wrolSLent      "Sec.  71.     Wheee  the  instrument  ,s 

is  not  payable  on  ^'^^T    payable    on    demand,    presentment 

demand  and  must  be  made  on  the  day  it  fali^  due. 

where  payable  on  Where  it  is  payable  on  demand,  present- 

•^t"^^     1  ment  must  be  made  within  a  reasonable 

"Nebraska. 
New  Hampshire     time  after  its  issue/  except  that  in  the 

"So.  Dakota.        case  of  a  bill  of  exchange,  presentment 

^Vermont.  for  payment  will  be  sufficient  if  made 

WITHIN    A    REASONABLE    TIME    AFTER''    THE    LAST    NEGOTIATION 
THEREOF. '^ 

Unless  presentment  for  payment  is  dispensed  with  in 
the  manner  provided  in  this  Act  or  delay  in  presenting 
the  instrument  is  excused  (Sees.  81  and  82),  it  must  be 
made  upon  the  very  day  w-hen  it  falls  due.  This  applies 
to  instruments  payable  at  a  definite  and  fixed  or  a  deter- 
minable time  after  date  or  acceptance,^  and  not  to  instru- 
ments payable  on  demand.  The  latter  are  payable  at 
any  time  the  holder  may  wish  to  demand  payment.  If  a 
series  of  notes  contains  a  provision  that  in  default  of 
payment  of  one  of  them  at  maturity  those  maturing  sub- 
sequently shall  become  due  at  once,  and  one  is  dishon- 
ored, the  others  need  not  be  presented  for  pajTuent  on 
the  day  of  the  dishonor  of  the  one  upon  which  the  maker 
defaults.  They  may  be  presented  within  a  reasonable 
time  after  the  dishonor  of  that  one  of  the  series  which 
is  not  paid  at  maturity.^ 

1.     Creteau  vs.  Foote,  etc.,  Glass  Co.,  40  App.  Div.   (N.  Y.)   215, 
57  N.  Y.  S.  1103. 


§71  PKESENTMENT   FOR  PAYMENT  127 

It  is  provided  by  this  section,  however,  that  if  the 
instrument  is  payable  on  demand  it  must  be  presented 
within  a  reasonable  time  after  its  issue  if  it  is  a  promis- 
sory note,  or  after  its  last  negotiation,  if  it  is  a  bill.  The 
holder  of  a  promissory  note  which  is  payable  upon  de- 
mand and  bears  indorsements,  cannot  carry  the  note  an 
indefinite  and  long  time  in  security  without  presenting  it, 
making  demand  for  its  payment  and,  if  it  is  not  paid, 
giving  notice  of  its  dishonor  to  the  indorsers  in  the  man- 
ner provided  in  this  Act.  But,  having  made  the  present- 
ment and  given  due  notice  of  its  dishonor,  he  may  wait 
as  long  as  he  likes  for  its  payment,  the  time  for  enforcing 
payment  then  being  limited  only  by  the  statute  of  limita- 
tions applicable  to  such  instruments  in  the  State  in  which 
their  enforcement  is  sought. 

Before  the  adoption  of  this  Act  a  promissory    note 
bearing  indorsements,  payable  upon  demand  without  in- 
terest, was  held  to  require  presentment,  demand  and  no- 
tice to  indorsers  immediately,  on  the  day  of  or  the  day 
after  its  issue,  in  order  to  charge  the  indorsers.    Such  a 
note  bearing  interest  was,  however,  held  to  contemplate 
a  continuing  loan,  and  presentment  and  demand,  it  was 
held,  might  be  made  and  notice  given  at  any  time  after 
its  issue,  within  the  statute  of  limitations,  of  course.    But 
now  this  Act  is  interpreted  to  mean  that  this  distinction 
does  not  exist.    This  section  negatives  all  such  decisions 
in  States  where  a  contrary  rule  prevailed  and  a  promis- 
sory note  bearing  indorsements  and  w^hich  is  payable  on 
demand,  whether  it  bears  interest   or   does  not,   must 
be  presented  for  payment  and  payment  demanded  within 
a  reasonable  time  after  its  issue.-    If  it  is  not  paid,  no- 
tice of  its  dishonor  must  be  given  to  each  indorser  in  the 
manner  provided  in  this  Act  or  he  will  be  discharged. 

2.     Commercial   Nat'l    Bank    vs.    Zimmerman,   185   N.    Y.    210,    77 
N.  E.  1020. 


128  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  71 

What  is  a  reasonable  time  for  presentment  is  not  es- 
tablished by  the  Act  or  by  any  interpretation  of  the  Act 
in  such  a  manner  as  will  permit  a  fixed  rule  to  be  given. 
As  short  a  period  as  four  months  has  been  held  to  be  un- 
reasonable.2  The  New  Hampshire  Act  fixes  sixty  days, 
for  demand  notes.  Decisions  by  courts  are  uniform  that 
a  delay  of  more  than  three  years  to  demand  payment 
upon  a  promissory  note  payable  upon  demand  is  unrea- 
sonable. This  Act  provides  (Sec.  193)  what  shall  be  con- 
sidered in  determining  what  is  a  "reasonable"  or  an 
"unreasonable"  time,  but  regardless  of  circumstances, 
it  is  thought  entirely  unsafe  to  delay  presentment  and  de- 
mand upon  such  an  instrument  longer  than  four  months 
after  its  issue.  Under  certain  circumstances  delay  for  a 
much  shorter  period  might  be  considered  unreasonable. 
The  utmost  precaution  should  be  exercised  in  this  regard 
by  the  holder  and  when  a  demand  note  contemplates  a 
long  time  loan  indorsers  ought  to  be  required  to  waive 
presentment,  demand,  and  notice  of  non-payment,  or  de- 
mand should  be  made  and  notice  given  within  a  short 
period,  not  to  exceed,  in  ordinary  cases,  four  months 
after  the  note  is  issued.  This  being  done,  if  the  instru- 
ment is  not  replaced  by  another  it  may  be  permitted  to 
run  indefinitely,  subject  to  the  statute  of  limitations 
which  fixes  the  time  at  which  it  will  be  barred. 

In  the  case  of  a  bill  of  exchange  which  is  payable  on 
demand,  and  this  includes  a  check,  the  demand  must  be 
made  within  a  reasonable  time  after  its  issue  or  last  ne- 
gotiation and  all  that  is  here  said  in  regard  to  promis- 
sory notes  applies  with  equal  force  to  such  an  instru- 
ment, except  that,  it  seems  to  the  writer,  a  delay  of  four 
months  or  even  one  month,  as  these  instruments  are  now 
used,  would  be  regarded  as  an  unreasonable  length    of 

3.     Frazer  vs.  Plienix  Nat.  Bank,  161  Ky.  175,  170  S.  W.  532. 


§71  PRESENTMENT   FOR  PAYMENT  129 

time  to  delay  presentment  or  to  interrupt  the  negotia- 
tion without  making  presentment.  This  statement  is 
subject  to  the  qualification  that  if  bills  of  exchange  shall 
come  into  more  extensive  use  as  the  means  of  discount 
and  investment  rather  than  as  collection  items,  which 
seems  now  to  be  their  present  most  general  use  in  this 
country,  custom  will  order  that  the  same  rules  of  delay 
as  are  now  applied  to  promissory  notes  shall  apply  to 
bills  of  exchange. 

Checks  require  even  more  prompt  presentment,  par- 
ticularly when  they  have  been  deposited  for  collection  by 
a  bank.  I  shall  present  in  considerable  detail  in  another 
part  of  this  book  the  requirements  of  the  law  as  they  are 
applicable  to  the  presentment  of  checks  by  a  bank.  While 
they  continue  to  be  negotiated  and  until  they  are  de- 
posited in  bank,  there  does  not  seem  to  be  any  good  rea- 
son why  checks  need  be  presented  with  any  greater  dis- 
patch than  other  bills  of  exchange  payable  on  demand, 
that  is,  in  so  far  as  the  liability  of  indorsers  may  be  af- 
fected by  the  length  of  time  they  continue  to  be  negoti- 
ated. But  checks  which  are  not  intended  for  negotiation 
must  be  presented  at  once,  the  day  of  or  the  day  after 
their  issue  or  deposit  if  they  are  banked  at  the  place  of 
payment,  or  they  must  be  forwarded  by  direct  route 
within  that  time  by  the  collecting  bank  for  presentment 
to  the  bank  upon  which  they  are  drawn  if  they  are  pay- 
able elsewhere.'* 

This  Act  provides  elsewhere  (Sec.  186),  that  if  a  check 
is  not  presented  for  payment  within  a  reasonable  time 
after  its  issue  the  drawer  will  be  released  from  liability 
to  the  extent  of  any  loss  he  may  suffer  by  reason  of  the 

4.     Plover  Savings  Bank  vs.  Moodie,  135  Iowa,  685,  110  N.  W.  29^ 
113  N.  W.  476. 
Columbian  Banking  Co.  vs.  Bowen,  134  Wise.  218. 


130  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  71 

delay.  This  is,  of  course,  intended  as  a  protection  to 
him  in  case  the  drawee  bank  should  fail  before  his  check 
is  presented.  There  is  no  similar  provision  in  favor  of 
indorsers  and  if  it  shall  be  held  that  they  are  also  re- 
leased by  delay  in  making  presentment  of  a  check  it  must 
be  because  of  banking  custom  and  the  need  of  most  men 
for  the  immediate  use  of  money,  supply  the  other  two 
elements  to  be  taken  into  account  in  determining  what  is 
or  is  not  a  reasonable  delay.  (Sec.  193.)  Read  in  con- 
nection with  this  explanation  what  has  already  been  said 
under  Sections  7  and  53,  and  see  Sees.  144  and  193,  and 
the  synopsis  of  the  law  applicable  to  the  collection  of 
checks  at  the  conclusion  of  Title  III. 

When  a  time  instrument  is  payable  in  installments  sep- 
arate demand  must  be  made  at  the  maturity  of  each  and 
upon  dishonor,  notice  must  be  given  in  the  manner  pro- 
vided in  Sees.  89  to  118  as  in  other  cases,  unless  the  in- 
strument contains  a  provision  that  in  default  in  the  pay- 
ment of  any  installment  all  shall  become  due.  In  that 
case  the  presentment  and  demand  at  the  maturity  of  the 
first  installment  at  which  default  is  made  effects  the  dis- 
honor of  the  whole  instrument  if  it  is  not  paid  and  no 
further  presentment  or  demand  need  be  made.  If  the 
later  installments  are  to  mature  at  the  option  of  the 
holder,  demand  may  be  postponed  until  the  last  install- 
ment falls  due  and  then  made.^  When  the  instrument 
contains  a  provision  that  the  whole  sum  shall  mature 
and  be  payable  upon  default  in  the  payment  of  any  in- 
stallment of  interest,  demand  must  be  made  and  notice 
e-iven  at  the  first  default  in  order  to  hold  the  in- 
dorsers,^  unless  the  accelerated  maturity  is  optional 
with  the  holder.     (See  Sees.  2  and  52.) 


5.  Eastman  vs.  Thurman.  24  Cal.  379. 

6.  Mallon  vs.  Stevens,  6  Ohio  Dec.  Reprint,  1042,  9  Am.  L.  B.  702, 

6  Cinti.  Law  Bui.  69. 


§72  PRESENTMENT  FOR  PAYMENT  131 

What  constitutes      ' '  Sec.    72.    Pkesentment  for  payment, 
sufficient  TO  be  sufficient,  must  be  made  : 

presentment,  ^      j3y  the  holdek  ok  by  some  pebson 

AUTHORIZED  TO  RECEIVE  PAYMENT  ON  HIS  BEHALF ; 

2.  At  a  REASONABLE   HOUR  ON   A  BUSINESS  DAY; 

3.  At  a  PROPER  PLACE  AS  HEREIN  DEFINED; 

4.  To  THE  PERSON  PRIMARILY  LIABLE  ON  THE  INSTRU- 
MENT, OR  IF  HE  IS  ABSENT  OR  INACCESSIBLE,  TO  ANY  PERSON 
FOUND  AT  THE  PLACE  WHERE  THE  PRESENTMENT  IS  MADE. 

Presentment  for  payment  must  be  made  in  the  manner 
prescribed  in  this  section  and  to  be  made  in  a  manner 
that  will  charge  the  drawer  and  indorsers,  it  must  be 
made  at  a  reasonable  hour  on  a  business  day  by  the  hold- 
er or  by  some  person  acting  for  him  to  whom  he  has  giv- 
en authority  to  receive  payment  upon  the  instrument. 
Some  one  must  be  sent  with  the  instrument  who  is  au- 
thorized to  receive  the  money  upon  it.'^  Therefore,  if  the 
person  who  takes  the  instrument  for  the  purpose  of  pre- 
senting it  for  pajTiient  to  the  party  obliged  to  pay  it 
when  it  becomes  due,  is  not  authorized  by  the  holder  to 
collect  it  and  surrender  the  instrument  upon  payment, 
or  goes  merely  to  notify  him  that  the  holder  has  the  in- 
strument and  makes  only  an  informal  request,  this  wdll 
not  be  a  sufficient  presentment.^ 

The  mere  possession  of  an  instrmnent  payable  to 
bearer  is  sufficient  evidence  of  authority  to  present  it 
for  payment  but  would  not  be  sufficient  if  the  instrument 
is  payable  to  order.^  Something  more  is  required  of  such 
an  instrument  and,  while  the  authority  to  make  present- 
ment and  receive  payment  need  not  be  in  writing,  it  must 
be  shown  by  satisfactory  proof,  when  required,  that  the 
person  making  presentment  did  so  by  authority  of  the 

7.  Foss  vs.  Norris,  70  Me.  117. 

Fowler  Paper  Co.  vs.  Jones  Sales  Bk.  Co.,  183  111.  A.  310. 

8.  St.  of  N.  Y.  Natl.  Bank  vs.  Kennedy,  145  App  Div.  (N.Y.)  669. 

9.  Doubleday  vs.  Kress,  50  N.  Y.  410. 


132  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  72 

holder,  if  his  indorsement  does  not  appear  upon  the  in- 
strument.^" 

If  the  instrument  is  payable  at  the  place  of  business 
the  party  who  is  to  pay  it,  it  must  be  presented  there 
during  business  hours  on  a  business  day  and  if  sent  or 
taken  there  too  long  before  the  beginning  or  too  long  after 
the  close  of  business  hours,  the  presentment  will  not  have 
been  properly  made.^^ 

All  days  of  the  year  are  business  days  except  Sundays 
and  such  holidays  as  are  established  by  statute  or  by 
proclamation  in  the  various  States. 

The  person  who  makes  presentment  must  go  to  the 
proper  place,  and  he  must  have  the  instrument  with  him 
in  order  that  he  may  be  prepared  to  exhibit  or  surren- 
der it  if  it  becomes  necessary  to  do  so.  (Sec.  74.)  What  is 
the  proper  place  is  defined  in  the  next  section.  (Sec.  73.) 
Arriving  at  the  proper  place  at  the  proper  time,  he  must 
make  the  presentment  in  the  manner  required  by  Sec. 
74  to  the  person  who  is  to  pay  the  instrument.  If  that 
person  is  absent  or  access  to  him  is  refused  or  cannot  be 
had,  presentment  may  be  made  to  any  one  found  at  the 
place  where  presentment  is  to  be  made.  Although  the 
person  fouund  there  may  have  no  connection  with  the 
party  primarily  liable  upon  the  instrument,  presentment 
to  him  is  good.  If  the  instrument  is  presented  to  any 
person  other  than  the  party  primarily  liable  to  pay  it, 
diligent  inquiry  ought  to  be  made  by  the  presenter  to 
learn  whether  he  has  any  authority  to  pay  the  instru- 
ment and  whether  or  not  he  has  any  business  connection 
with  the  party  obliged  to  pay  it.  If  payment  is  refused 
a  careful  record  should  be  made  upon  the  instrument,  or 
in  some  other  manner  if  the  instrument  is  lost  or  mis- 

10.  Watt  vs.  Potter,  29  Fed.  Cas.  17,291. 
Robertson  vs.  Crane.  27  Miss.  362,  61  Am.  D.  520. 

11.  Waring  vs.  Betts,  90  Va.  46,  53, 


§73  PRESENTMENT   FOR  PAYMENT  133 

placed,  of  the  date  and  hour  and  the  person  to  whom  it 
was  presented  and  of  the  reason  given  for  the  refusal. 

Presentment  and  demand  for  payment  by  letter  or  by 
telephone  may  not  be  made  and  if  attempted  will  not 
charge  an  indorser.^^  ^  waiver  of  presentment  by  tele- 
phone is  good,  however.     (Sec.  82.) 

Place  of  "Sec.  73.     Pkesentment  foe  payment 

presentment.  is  made  at  the  peoper  place. 

1.  Wheee  a  place  of  payment  is  specified  ]n  the  in- 
steitment  and  it  is  tpieee  peesented ; 

2.  Where  no  place  of  payment  is  specified,  but  the 
addeess  of  the  peeson  to  make  payment  is  given  in  the 
insteument  and  it  is  theee  presented; 

3.  Wheee  no  place  of  payment  is  specified  and  no  ad- 
dress IS  GIVEN  AND  THE  INSTEUMENT"  IS  PEESENTED  AT  THE 
USUAL  PLACE  OF  BUSINESS  OE  EESIDENCE  OF  THE  PEESON  TO 
MAKE  PAYMENT; 

4.  In  ANY  OTHEE  CASE  IF  PEESENTED  TO  THE  PERSON  TO 
MAKE  PAYMENT  WHEEEVEE  HE  CAN  BE  FOUND,  OE  IF  PEE- 
SENTED AT  HIS  LAST  KNOWN  PLACE  OF  BUSINESS  OE  RESI- 
DENCE." 

The  holder  is  deemed  to  have  made  a  sufficient  present- 
ment if  he  has  presented  the  instrument  in  the  manner 
described  in  the  preceding  section,  or  has  caused  it  to 
be  done,  at  the  place  named  in  it  as  the  place  where  pre- 
sentment is  to  be  made.  This  is  true  even  if  the  place 
named  is  neither  the  residence  nor  place  of  business  of 
the  person  who  is  to  pay  the  instrument  and  he  is  known 
to  be  elsewhere,  and  not  at  that  place,  at  the  time  of 
presentment,  although  in  that  case  it  would  seem  to  be 
proper,  even  if  it  is  not  the  duty  of  the  presentei',  to  de- 
mand payment  of  the  person  who  is  to  paj^  the  instru- 
ment at  the  place  where  he  is  known  to  be  if  there  is  no 
one  who  is  authorized  to  pay  or  refuse  payment  at  the 
place  named  in  the  instrument.^^    But,  notwithstanding 

12.  Gilpin  vs.  Savaj^e,  201  N.  Y.  167. 

13.  Snlzbacher  vs.  Bank  of  Charleston,  86  Tenn.  201. 
Pierce  vs.  Stnatliers,  27  Pa.  249. 


134  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  73 

former  decisions  to  the  contrary,  or  decisions  which  in- 
timate that  an  attempt  ought  to  be  made  to  find  the  per- 
son who  is  to  pay  the  instrument  if  he  is  not  at  the  place 
named  in  it  and  that  place  has  been  abandoned  by 
him,  the  statute  does  not  require  this  and  it  need  not  be 
done.  It  is  the  duty  of  the  person  primarily  liable  upon 
the  instrument  to  provide  the  funds  for  its  payment  and 
have  them  ready  at  the  place  of  payment  in  the  hands  of 
someone  at  that  place  who  is  authorized  to  pay  the  in- 
strument, and  it  is  equally  the  duty  of  the  holder  of  the 
instrument  to  present  it  for  payment  at  that  place.^^ 

If  no  place  is  mentioned  but  the  address  is  given  of  the 
person  who  is  to  pay  the  instrument,  it  must  be  presented 
at  that  address.  If  both  are  given  the  place  of  payment 
mentioned  in  the  body  of  the  instrument  is  the  place 
where  it  must  be  presented  even  if  it  conflicts  with  the 
address  of  the  person  who  is  to  make  paj'^ment.  If  the 
instrument  is  payable  at  a  designated  branch  of  a  bank 
or  Trust  Company  it  must  be  presented  at  the  branch 
designated,  if  it  is  in  existence  at  the  maturity  of  the  in- 
strument. Presentment  at  the  principal  office  will  not, 
in  that  case  be  good.^^  If  the  branch  has  been  discon- 
tinued and  is  no  longer  doing  business  at  the  maturity  of 
the  instrument,  presentment  at  the  main  bank  will  be 
proper. ^^ 

When  the  instrument  mentions  no  place  of  payment 
and  does  not  give  the  address  of  the  person  who  is  to 
pay  it,  it  may  be  presented  at  either  his  usual  place  of 
business  or  residence. 

14.  Ironclad  Mfg.  Co.  vs.  Saekin,  129  App.  Div.  (N.  Y.)  555,  114 

N.  Y.  S.  42. 

15.  Ironclad  Mfg.  Co.  vs.  Saekin,  129  App.  Div.  (N.  Y.)  555,  114 

N.  Y.  St.  42. 

16.  Nashville  Bank  vs.  Henderson,  5  Yerg.   (Tenn.)  104,  26  Am. 

D.  257. 


§74  PRESENTMENT   FOR  PAYMENT  135 

In  any  other  case,  presentment  may  be  made  to  the  per- 
son obliged  to  pay  the  instrument  at  the  place  where  he 
was  last  known  to  have  been  engaged  in  business  or  to 
have  lived,  or  it  may  be  made  to  him  personally  wher- 
ever he  can  be  found  if  the  instrument  cannot  be  pre- 
sented for  payment  in  accordance  with  the  other  require- 
ments of  this  section. 

Instrument  must  "Sec.  74.  The  instrument  must  be 
be  exhibited.  exhibited  to  the  person  from  whom  pay- 
ment IS  demanded,  and  when  it  is  paid  must  be  delivered 
UP  to  the  party  paying  it." 

The  person  who  makes  presentment  of  the  instrument 
must  have  it  in  his  possession  and,  if  requested  to  do  so, 
must  show  it  to  the  person  of  whom  payment  is  de- 
manded.    When  it  is  paid  he  must  deliver  it  up  to  the 
party  who  pays  it.    If  it  is  secured  by  collateral  he  must 
be  prepared  to  produce  and  deliver  up  the  collateral.^' 
He  has  no  right  to  reijuire  payment  unless  he  is  prepared 
to  deliver  up  the  instrument  immediately  upon  its  pay- 
ment.    If  the  instrument  is  lost  or  destroyed,  present- 
ment and  demand  for  payment  without  the  bill  or  note 
must  be  made  on  the  day  of  maturity  and  while  the  per- 
son who  is  to  pay  it  might  properly  refuse  to  do  so,  if  his 
refusal  is  not  for  that  reason,  notice  of  its  dishonor  must 
be  given  immediately.^^    If  the  lost  instrument  is  a  bill  of 
exchange  and  protest  is  necessary  (see  Sec.  152),  it  must 
be  made  in  the  manner  described  in  Sec.  153  upon  a  copy 
or  written  particulars.     (Sec.  160.)     Wlien  the  instru- 
ment or  a  copy  is  produced,  it  might  be  well  to  again  pre- 
sent it  for  payment  and  if  .payment  is  then  refused  pro- 
ceed in  the  same  manner  as  if  it  had  been  dishonored 
upon  the  day  of  its  maturity.    The  loss  or  destruction  of 
the  instrument  will  occasion  complications  in  determin- 

17.  Ocean  iS^at  '1  Bank  vs.  Fant,  50  K  Y.  474. 

18.  Hinsdale  vs.  Miles,  5  Conn.  331. 
Klots  vs.  Silver,  118  N.  Y.  S.  1090. 


136  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  75 

ing  the  liability  of  the  secondary  parties  the  solution  of 
which  must  depend  upon  the  circumstances  of  each  par- 
ticular case. 

Presentment  ''Sec.  75.     Where  the  instrument  is 

where  instrnment  payable  at  a  bank,  presentment  for  pay- 
payable  at  bank,  ment  must  be  made  during  banking 
"Nebraska.  hours/  unless  the  person  to  make  pay- 

ment HAS  NO  FUNDS  THERE  TO  MEET  IT  AT  ANY  TIME  DURING 
THE  DAY,  IN  WHICH  CASE  PRESENTMENT  AT  ANY  HOUR  BEFORE 
THE  BANK  IS  CLOSED  ON  THAT  DAY  IS  SUFFICIENT. ' ' 

If  an  instrument  is  to  be  paid  at  a  bank,  it  must  be 
presented  during  banking  hours  unless  the  person  who  is 
to  pay  it  has  not  at  any  time  during  the  day  on  which  it 
is  presented  for  payment,  sufficient  money  at  the  bank 
named  with  which  to  pay  it.  In  that  case  it  may  be 
presented  at  the  bank  after  banking  hours  but  before 
the  bank  is  closed  for  the  day.  Banking  hours  are  those 
hours  during  which  the  bank  is  open  for  business  of  re- 
ceiving and  paying  out  money,  but  this  may  depend  up- 
on local  custom  and  in  some  localities  a  presentment  at 
any  time  while  the  bank  remains  open  for  business  is 
deemed  to  be  sufficient.^^''  Ordinarily,  pa^mient  at  a  bank 
ought  to  be  demanded  near  the  close  of  banking  hours, 
for  if  the  demand  is  made  early  in  the  day  and  payment 
is  not  obtained,  and  the  person  who  is  to  pay  the  instru- 
ment later  deposits  sufficient  money  to  pay  it,  the  early 
demand  will  be  considered  premature.^''  The  early  pre- 
sentment is  sufficient  to  charge  secondary  parties,  but  the 
person  obliged  to  pay  the  instrument  would  not  be 
chargeable  with  fees  and  costs  on  protest  after  the  pre- 

ISa.  Columbian  Bk.  vs.  Bowen.  134  Wis.  218. 

Columbia-Knickerbocker   Tr.    Co.    vs.   Miller,   156   App.    Div. 

(N.  Y.)  810. 
Citizens  Central  Bk.  vs.  Xew  Amsterdam  Nat.  Bk.,  128  App. 
Div.  (N.  Y.)  554. 

19.     German- American   Bank   vs.  Milliman.  31   Misc.    (N.   Y.)    87, 
65  N.  Y.  S.  242. 


§76  PRESENTMENT   FOR  PAYMENT  137 

mature  presentment  if  it  is  shown  that  he  had  sufficient 
funds  at  bank  to  pay  the  instrument  before  the  close  of 
banking  hours  on  that  day. 

Observe  that  by  Section  2  of  Section  72  the  present- 
ment must  be  made  at  a  "reasonable  hour."  If  it  is  not 
convenient  to  present  the  instrument  at  a  reasonable 
hour  at  the  bank  at  which  it  is  payable,  it  is  the  custom 
to  send  the  instrument  to  the  bank  where  it  is  to  be  paid 
and  leave  it  there  until  the  close  of  business  of  the  day  on 
which  it  is  payable.     (Also  see  Sec.  87.) 

'Presentment  "Sec.   76.     Where   the   person   primar- 

where  ily  liable  on  the  instrument  is  dead,  and 

principal  is  dead,  ^tq  place  of  payment  is  specified,  pre- 
sentment FOR  PAYMENT  MUST  BE  MADE  TO  HIS  PERSONAL 
representative,  IF  SUCH  THERE  BE,  AND  IF  WITH  THE  EXER- 
CISE  OF   REASONABLE   DILIGENCE,    HE    CAN    BE   FOUND." 

If  the  person  who  is  first  of  all  liable  to  pay  the  in- 
strument is  dead  at  the  time  pa\Tnent  becomes  due  and 
there  is  no  place  of  payment  specified,  its  presentment 
for  payment  must  be  made  to  his  personal  representa- 
tive. The  personal  representative  of  a  dead  person  is 
the  executor  or  administrator  of  his  estate,  acting  by  ap- 
pointment of  some  court.  To  ascertain  who  is  the  proper 
person  to  whom  presentment  should  be  made  when  the 
person  primarily  liable  upon  the  instrument  is  dead,  the 
holder  is  required  to  use  reasonable  diligence,  which 
means,  he  is  required  to  make  such  active  inquiry  and 
effort  to  learn  who  he  is  and  where  he  is  to  be  found  as  an 
ordinarily  prudent  man  would  make  under  similar  cir- 
cumstances to  protect  his  own  interests. ^^^ 

If  there  are  two  or  more  executors  or  administrators 
of  the  decedent's  estate,  presentment  to  one  of  them  is 
sufficient.  If  the  personal  representative  of  the  deceased 
party  prove  to  be  one  who  is  himself  a  party  to  the  bill, 

19a.  Reed  vs.  Spear,  107  App.  Div.  (N.  Y.)  144. 


138  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  77 

presentment  to  him  in  his  representative  capacity  is 
nevertheless  required.^^' 

If  it  cannot  be  determined  who  is  the  proper  personal 
representative  of  the  deceased  person  or  where  he  may 
be  found,  the  presentment  should  be  made  at  the  dece- 
dent's late  place  of  residence.-^  If  no  pernonal  representa- 
tive of  the  deceased  person  can  be  found,  the  holder  may 
make  presentment  to  the  widow  or  other  member  of  the 
family  of  the  deceased  at  his  residence  and  if  the  in- 
strument is  not  paid  he  must  proceed  with  the  steps  nec- 
essary upon  dishonor.2- 

Presentment  "Sec.  77.     Where  the  persons  primar- 

to  persons  liable  ILY  liable  on  the  instrument  are  liable 
as  partners.  as  partners,  and  no  place  of  payment  is 

specified,  presentment  for  payment  may  be  made  to  any 

ONE  of  them,  even  THOUGH  THERE  HAS  BEEN  A  DISSOLUTION 
OF  THE  FIRM." 

If  persons  who  are  partners  are  primarily  liable  upon 
the  instrument,  or  if  having  become  liable  as  partners, 
their  partnership  has  been  dissolved  before  the  time 
when  presentment  must  be  made  and  no  place  of  pay- 
ment is  named  in  the  instrument,  it  may  be  presented  to 
either  of  them,  notwithstanding  the  fact  that  the  part- 
nership has  been  dissolved.  Presentment  to  one  of  sev- 
eral partners  or  former  partners  is  sufficient  and  it  may 
be  made  in  the  manner  prescribed  in  Section  73.  If  a 
place  is  named  in  the  instrument  as  the  place  where  it  is 
to  be  presented  for  payment,  a  presentment  at  that  place 
is  a  proper  presentment  even  though  the  partnership 
has  dissolved  or  ceased  to  do  business  there. -^ 

Presentment  to  "Sec.  78.     Where    there   are    several 

joint  debtors.  persons,  not  partners,  primarily  liable 
on  the  instrument,  and  no  place  of  payment  is  spbci- 
fied,  presentment  must  be  made  to  them  all." 

20.  Ma,e:nKler  vs.  Union  Bank,  3  Pet.  (U.  S.)  87,  87  L.  Ed.  612. 

21.  Washinj^ton  Bank  vs.  Reynolds,  2  Fed.  Cas.  No.  954. 

22.  Washington  Bank  vs.  Reynolds,  2  Fed.  Cas.  (U.  S.)  954. 
Reed  vs.  Spear,  107  App.  Div.  (N.  Y.)  144,  94  N  Y.  S.  1007. 

23.  Cox  vs.  New  York  St.  Bank,  100  U.  S.  704,  25  L  Ed.  739. 


§79  PRESENTMENT  FOR  PAYMENT  139 

Several  persons  may  join  in  the  execution  of  the  in- 
strument and  thus  all  become  primarily  liable  but  not 
as  partners.  These  are  called  joint  makers  or  acceptors, 
as  the  case  may  be,  and  in  order  to  be  sufficient  to  charge 
the  indorsers  upon  their  instrument,  presentment  must 
be  made  to  each  of  them  if  no  place  of  payment  is  named 
in  the  instrument.  If  they  reside  in  different  cities  this 
cannot,  of  course,  be  done.  In  that  case  the  saving  clause 
of  Sec.  82  will  dispense  with  presentment  to  those  to 
whom  it  cannot  be  made. 

If  a  place  of  payment  is  named,  presentment  must  be 
made  there  and  it  is  good  even  if  none  of  the  joint  makers 
or  acceptors  are  found  at  that  place.  And  if  only  one  is 
found  there,  presentment  to  him  is  sufficient.    (Sec.  72.) 

When  present-  ' '  ^^^-  ^^-     Presentment  for  payment 

ment  not  re-  is  not  required  in  order  to  charge  the 
quired  to  charge  drawee  where  he  has  no  right  to  expect 
the  drawer.  q-^  require  that  the  drawee  or  acceptor 

WILL  PAY  the  instrument." 

Unlike  the  maker  of  a  promissory  note,  the  drawer  of 
a  draft  or  bill  of  exchange  is  entitled  to  have  the  instru- 
ment presented  for  pajTnent  for  he  is  a  secondary 
party,  liable  to  pay  only  if  the  drawee  or  acceptor  does 
not.  If  the  instrument  remains  unpaid  at  maturity  he 
will  be  discharged  from  liability  by  the  holder's  failure 
to  make  presentment  and  demand  and  give  him  the  notice 
to  which  he  is  entitled.  (Sec.  89.)  However,  if  it  should 
appear  that  the  drawer  has  no  right  to  expect  the  drawee 
or  acceptor  to  pay  the  instrument,  or  no  right  to  require 
him  to  do  so,  as,  for  example,  when  he  draws  the  bill  for 
his  own  accommodation  and,  having  agreed  to  do  so,  he 
does  not  put  the  acceptor  in  funds  with  which  to  pay  it 
when  due,  he  is  not  then  entitled  to  notice  of  its  dishonor. 
The  failure  of  the  holder  to  present  the  instrument  and 
give  him  notice  of  its  dishonor  will  not,  under  these  cir- 


140  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  80 

cumstances,  release  him  from  liability.  But  the  fact  alone 
that  the  drawer  had  no  fmids  in  the  hands  of  the  drawee 
when  he  drew  the  bill  is  not  sufficient  to  dispense  with 
presentment  of  the  bill  for  payment,-^  unless  he  drew^ 
with  the  understanding  that  he  would  provide  the  ac- 
ceptor with  funds  to  pay  it  at  maturity  and  failed 
to  do  so. 

When  present-  ''Sec.  80.     Presentment  for  payment 

ment  not  re-  is  not  required  in  order  to  charge  an  in- 
quirecl  to  charge  dorser  where  the  instrument  was  made 

the  indorser.  q^  accepted  for  his  accommodation"  and 
''Illinois 

HE  HAS  NO  REASON  TO  EXPECT  THAT  THE  IN- 
STRUMENT WILIj  be  paid  if  PRESENTED." 

This  section  effects  a  very  important  change  in  the 
law  in  respect  to  the  right  of  an  indorser  who  is  himself 
the  accommodated  party  to  require  presentment  for  pay- 
ment. Lentil  its  enactment  such  a  party  was  held  not  to 
be  discharged  from  liability  upon  the  instrument  under 
any  circumstances,  by  the  failure  of  the  holder  to  prop- 
erly present  it  for  payment  at  maturity.  But  there  is 
now  a  ver^^  important  qualifying  clause  in  the  section 
which  considerably  modifies  this  old  and  well  established 
rule,  so  that  now,  if  it  can  be  sho-wm  that  the  accommo- 
dated indorser  had  any  reason  to  expect  the  maker  to  pay 
the  instrument  if  presented,  he  w^ill  be  discharged  by  the 
failure  of  the  holder  to  make  presentment.^^  None  of 
the  cases  cited  directly  decides  the  point  as  I  have  stated 
it  and  I  have  not  been  able  to  find  any  that  does,  but  they 
hold,  inf  erentially,  that  if  an  accommodated  indorser  has 
any  reason  to  expect  that  the  instrument  will  be  paid  if 
presented,  a  failure  to  present  it  will  discharge  him.  The 

24.  Life  Insurance  Co.  vs.  Pendleton,  112  U.  S.  696,  708. 
Welch  vs.  B.  C.  Taylor  Co.,  82  111.  579,  581. 

25.  McDonald  vs.  Luckenbach,  170  Fed.  434 ;  95  C.  C.  A.  60A. 
Belch  vs.  Roberts  (Mo.),  177  S.  W.  1062. 

Murray  vs.  Third  Nat  T  Bk.,  234  Fed.  481, 148  C.  C.  A.  247. 


§81  PRESENTMENT   FOR  PAYMENT  141 

section  now  makes  applicable  to  a  promissory  note  or  an 
acceptance  which  is  made  for  the  accommodation  of  an 
indorser,  a  rule  similar  to  that  enunciated  in  Sec.  79 
which  is  applicable  to  the  drawer  of  a  bill,  and  it  seems 
to  provide,  by  logical  inference,  that  the  instniment 
must  be  presented  for  payment  in  order  to  charge  the 
accommodated  indorser,  if  he  has  any  reason  to  expect 
the  maker  or  acceptor  to  pay  it,  as,  for  example,  if  he  has 
put  into  his  hands,  or  under  his  control,  the  money  with 
which  to  pay  the  instrument  at  maturity.  Except  in  such 
States  as  have  omitted  the  words  ''and  he  has  no  reason 
to  expect  that  the  instrument  will  be  paid  if  presented" 
it  is  now  necessary  to  present  the  instrument  for  pay- 
ment in  order  to  charge  an  indorser  for  whose  accommo- 
dation it  was  made  or  accepted,  unless  it  is  kno\ra,  and 
can  be  shown,  that  he  had  no  reason  to  expect  it  to  be 
paid  if  presented.  Section  115,  wherein  it  is  provided 
that  notice  of  dishonor  need  not  be  given  an  indorser  for 
whose  accommodation  the  instrument  was  made  or  ac- 
cepted, does  not  contain  a  similar  qualification. 

men  delay  in  ''Sec.  81.     Delay  in  making  present-- 

making  present-  ment  for  payment  is  excused  when  the 
ment  is  excused,  delay  is  caused  by  circumstances  beyond 
the  control  of  the  holder,  and  not  imputable  to  his 

DEFAULT,  misconduct,  OR  NEGLIGENCE.  AVhEN  THE  CAUSE 
OF  DELAY  CEASES  TO  OPERATE,  PRESENTMENT  MUST  BE  MADE 
WITH  REASONABLE  DILIGENCE." 

While  by  Sec.  71  the  instrument,  if  payable  upon  a  day 
certain,  must  be  presented  upon  the  day  when  it  falls  due, 
delay  in  making  the  presentment  is  excused  when  it  is 
caused  by  circumstances  beyond  the  control  of  the  holder, 
including  a  sudden  and  severe  sickness,  and  not  charge- 
able to  his  failure  to  perform  a  duty  which  he  is  himself 
obliged  to  perform,  or  to  his  own  wrongful  act,  care- 


142  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  82 

lessness  or  neglect.^^  The  holder  owes  to  all  parties  to 
the  instrument  the  duty  to  act  promptly,  in  good  faith 
and  carefuUy,  in  presenting  the  instrument  for  payment, 
and  if  he  does  so  and  yet,  by  some  circumstances  beyond 
his  control,  it  is  not  possible  for  him  to  present  the  in- 
strument for  payment  upon  the  day  when  presentment 
ought  to  be  made,  the  delay  will  be  excused.  The  cases 
cited  enumerate  some  of  the  circumstances  which  do  and 
others  which  do  not  dispense  with  presentment  or  ex- 
cuse delay  in  making  it.  Upon  the  removal  of  the  cause 
of  the  delay  the  holder  must  make  the  presentment  and 
he  must  proceed  with  reasonable  diligence.  The  cir- 
cumstances which  are  relied  upon  by  the  holder  as  an  ex- 
cuse for  presentment  at  the  proper  time,  must  be  alleged 
and  proved  by  him  in  any  action  which  he  may  bring 
upon  the  instrument  to  charge  any  of  the  parties  liable 
upon  it  who  are  entitled  to  notice  of  its  proper  and  timely 
presentment  and  dishonor. 

■y^ljen  ''Sec.  82.     Presentment  for  payment 

presentment  may    is  dispensed  with  : 

be  dispensed  ^      Where,  after  the  exercise  oi'  rea- 

^i*^-  sonable    diligence    presentment    as    re- 

quired BY  this  act  can  NOT  BE  MADE; 

2.  Where  the  drawee  is  a  fictitious  person  ; 

3.  By  waiver  of  presentment,  express  or  implied." 
Presentment  for  payment  need  not  be  made  at  all  if 

after  the  exercise  of  reasonable  diligence  it  cannot  be 
made  in  the  manner  required  in  this  Act.  It  need  not  be 
made  of  a  bill  of  exchange,  or  even  attempted,  if  the 
holder  learns  that  the  drawee  is  a  fictitious  person,  that 
is,  one  who  is  not  real  or  does  not  exist,  or,  as  the  Act 

26.     Young  vs.  Exchange  Bank,"  152  Ky.  293,  153  S.  W.  444,  Ann. 

Cas.  1915  B  148. 
Aebi  vs.  Bank  of  Evansville,  124  Wise.  73,  102  N.  W.  329, 

68  L.  R.  A.  964,  109  Am.  St.  Rep.  925. 
Wilson  vs.  Senier,  14  Wis.  380. 


§82  PRESENTMENT  FOR   PAYMENT  143 

has  been  interpreted  to  mean,  one  who  though  living  and 
real  has  no  interest  in  the  instrument.     (Sec.  9.) 

It   is   also   dispensed   with   by   waiver.      The   waiver 
may  be    expressed,   w^hich    is    usually   done    by    incor- 
porating the  waiver  in  the  body  of  the  instrument  before 
its  issue,  or  the  person  waiving  presentment  may  write 
words  at  his  signature,  or  may  utter  spoken  words  at 
the  time  of  transfer  which  expressly  declare  that  he  does 
not  require  presentment.     The  waiver  may  also  be  im- 
plied from  his  words  or  conduct.     The  express  waiver 
may  be  made  before,  at  or  after  the  maturity  of  the  in- 
strument.   It  need  not  be  in  writing  but  it  is  obvious  that 
when  an  indorser  expresses  his  willingness  to  waive  pre- 
sentment for  payment,  and  he  writes  upon  the  instrument, 
at  his  signature,  words  expressing  that  he  does  so,  this 
will     settle    all    question  of  his  intention.     But  if  .the 
waiver  is  expressed  in  a  separate  writing,  by  letter  or 
telegram^T   or  in  spoken  words^^    it    is    equally    bind- 
ing   although,    of    course,    in    that     case,     the     proof 
is  more  difficult.    No  consideration  need  be  given  for  the 
waiver,  whether  made  before  or  at,-^  or  after  the  ma- 
turity of  the  instrument.20    It  need  not  be  made  by  the 
party  himself  but  may  be  made  by  his  authorized  agent.^^ 
A  waiver  of  presentment  for  payment  and  notice  of 
non-payment  may  be  implied  from  any  words  or  acts  of 
the  person  it  is  sought  to  charge,  or  from  any  one  who 

27.  Bankers  State  Bank  vs.  Mason  Hand  Lathe  Co.,  121  Iowa,  570, 

97  N.  W.  70. 
Corner  vs.  Pratt.  138  Mass.  446. 

28.  Churchill  vs.  Ycat man-Gray  Groc.  Co.,  Ill  Ark.  529,  164  S. 

W.  283. 

29.  Neal  vs.  Wood,  23  Ind.  523. 

Robinson  vs.  Barnett,  19  Fla.  670,  45  Am.  R.  24. 
Uhler  vs.  Farmers  Nat.  Bank,  64  Pa.  406. 

30.  Bur-ettstown  Nat.  Bank  vs.  Nill,  213  Pa.  456    63  A.  186,  3 

L.  R.  A.  N.  S.  1079-Note,  5  Ann.  Cas.  476  &  Note. 

31.  Fowler  vs.  Fleming,  1  McMul.  (S.  C.  L.)  282. 


144  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  82 

speaks  or  acts  by  liis  authority  in  the  matter  before,  at, 
or  after  the  maturity  of  the  instrument,  if  the  words  or 
acts  are  of  such  character  as  will  satisfy  any  reasonable 
person  that  a  waiver  was  intended,  or  if  they  are  such 
as  will  justify  him  in  believing  that  the  drawer  or  in- 
dorser  intended  to  dispense  with  presentment  of  the  in- 
strument for  payment.32  A  waiver  is  also  implied  if  the 
words  or  acts  are  uttered  or  done  in  such  a  manner  as 
will  justify  the  holder  in  believing  that  they  are  intended 
to  induce  him  to  forego  the  usual  proceedings  necessary 
to  fix  the  liability  of  the  drawer  and  indorser.^^ 

A  waiver  will  not  be  inferred  from  doubtful  language 
or  acts,  and  if  the  words^*  or  acts  proceed  from  any  per- 
son other  than  the  one  to  be  bound  by  them,  his  authority 
to  waive  must  be  clear  and  without  doubt  or  it  will  not 
bind  the  person  for  whom  he  assumes  to  act.  (Also  see 
Sees.  109,  110  and  111.) 

Of  course,  a  waiver  binds  no  one  except  that  person 
who  either  expressly  makes  or  authorizes  it  or  against 
whom,  by  reason  of  his  words  or  acts,  it  is  implied  (Sec. 
110) ;  and  where  there  are  several  parties  to  the  instru- 
ment who  are  entitled  to  presentment  and  notice,  a  waiver 
by  one  will  not  operate  against  the  others.  The  language 
or  acts  relied  upon  to  sustain  a  waiver  by  implication 
will  be  strictly  construed  and  will  not  be  interpreted 
beyond  the  fair. meaning  of  the  terms  used.=^^ 

32.  Maj^er  &  Bros.  Appeal,  87  Pa.  129. 

33.  Sigerson  vs.  Matthews,  20  How.  (U.  S.)  496,  15  L.  Ed.  989. 
Boyd  vs.  Bank  of  Toledo,  32  Ohio  St.  526. 

AVorley  vs.  Johnson,  60  Fla.  295. 

34.  Ross  vs.  Hurd,  71  N.  Y.  14. 
Worley  vs.  Johnson,  60  Fla.  295. 

35.  Glidden  vs.  Chamberlain,  167  Mass.  486,  46  N.  E.  103,  57  Am. 

S.  R.  477. 
Lititz  Nat  Bank  vs.  Siple,  145  Pa.  49,  22  A.  208. 


§83,84  PRESENTMENT   FOR  PAYMENT  145 

When  instrument      ''Sec.  83.     The  instrument  is  dishon- 

dishonored  by        ored  by  non-payment  when, 

non-payment.  -j^      j^  ^^  ^^^^  presented  for  PAYMENT 

AND  PAYMENT  IS  REFUSED  OR  CANNOT  BE  OBTAINED;  OR 

2.  PllESENTMENT  IS  EXCUSED  AND  THE  INSTRUMENT  IS 
OVERDUE  AND  UNPAID.'' 

The  dishonor  of  the  instrument  fixes  the  liability  of 
its  parties  and  the  holder  may  proceed  upon  the  dishonor 
if  he  has  properly  presented  the  instrument  for  pay- 
ment and  payment  is  refused,  or  if  he  cannot  obtain 
payment  at  the  place  where  it  is  to  be  made.  A  neglect 
to  pay  the  instrument  after  presentment  and  demand  is 
equivalent  to  a  refusal  to  do  so.  The  instrument  is  also 
dishonored  when  it  is  overdue  and  remains  unpaid  and 
presentment  is  excused. 

The  use  of  the  word  ''excused"  in  this  section  would 
seem  to  be  unfortunate  and  it  properly  means  "dis- 
pensed with."  That  term  would  have  been  more  ap- 
propriate, although  it  is  sometimes  used  as  a  synonym 
for  the  former.  The  Act  nowhere  "excuses"  present- 
ment. Delay  in  presentment  is  "excused"  by  Sec.  81, 
but  that  section  also  provides  that  when  the  cause  for 
delay  ceases  to  operate,  presentment  "must"  be  made 
with  reasonable  diligence. 

It  seems,  therefore,  that  this  section  must  be  under- 
stood to  mean  that  an  instrument  is  dishonored  when  it 
is  overdue  and  unpaid  and  presentment  has  been  dis- 
pensed with  in  accordance  with  Section  82. 

Liability  of  ''Sec.  84.     Subject  to  the  provisions 

person  OF  this  act,  when  the  instrument  is  dis- 

secondarily  liable  honored  by  non-payment  an  immediate 
when  instrument  right  of  recourse  to  all.  parties  second- 
dishonored.  arily    liable    thereon    accrues    to    the 

holder,  ' ' 

The  person  or  persons  who  by  the  terms  or  the  nature 
of  the  instrument  are  required  to  pay  it  are  the  persons 


146  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  85 

primarily  liable  and  all  other  parties  are  secondarily 
liable  (Sec.  192).  The  parties  secondarily  liable  are, 
therefore,  not  required  to  pay  the  instniment  until  it  has 
become  dishonored  by  reason  of  the  failure  of  the  person 
primarily  liable  to  do  so.  When  the  instrument  .has  be- 
come dishonored,  however,  all  parties  secondarily  liable 
are  immediately  liable  to  the  holder  who  can  not  be 
required  to  look  to  a  primary  party  for  payment,  but 
may  proceed  at  once  against  all  the  parties,  subject  only 
to  the  provisions  of  this  Act.  He  may  proceed  against 
them  separately  until  full  satisfaction  is  obtained,  or 
join  them  all  in  one  action  upon  the  instrument.^*^ 

*'Sec.  85.  Every  negotiable  instru- 
Time  of  maturity,  ment*  is  payable  at  the  time  fixed 
"Massachusetts,  t^ereix  without  grace."  When  the  day 
New  Hampshire,  c« 

N.  Carolina  ^^^    maturity    falls    upon    Sunday,    or   a 

Iowa.  holiday,  the  instrument  is  payable  on 

''Arizona,  the  next  succeeding  business  day.**     In- 

Colorado,  struments  falling  due*"  on  Saturday  are 

Kentucky,  ^^  ^^  presented  for  payment  on  the  next 

•^Delaware  SUCCEEDING  business  day,  except  that  in- 

Kansas,  STRUMENTS    PAYABLE    ON    DEMAND     MAY,    AT 

Massachusetts,       the  option  of  the  holder,  be  presented 

New  York.  ^^^  payment  BEFORE  twelve  0  'clock  NOON 

"Iowa.  oi 

eRhode  Island        ^^   Saturday  when  that  entire  day  is 

NOT  A  HOLIDAY.''*^ 

Every  negotial)le  instrument  matures  and  must  be  paid 
on  the  day  when  it  is  expressed  to  be  due  if  a  fixed  or 
determinable  date  of  maturity  is  mentioned  in  the  in- 
strument, and  it  must  be  presented  for  payment  on  that 
day  unless  a  delay  is  excused.  There  are  no  days  of 
grace  except  in  tliose  states  indicated  in  the  marginal  note. 
If  the  instrument  falls  due  on  Sunday  or  upon  a  holiday, 
or  upon  a  Saturday  if  it  is  not  a  demand  instrument,  it 
must  be  presented  on  the  next  succeeding  l)usiness  day. 

36.     Moore  vs.  Rogers,  19  111.  347. 

Morrison  vs.  Fisliell.  64  Ind.  177. 


§86,87  PRESENTMENT  FOR   PAYMENT  147 

An  instrument  payable  on  demand  may  be  presented 
for  payment  on  Saturday  when  that  day  is  not  an  entire 
holiday  if  the  presentment  is  made  before  twelve  o'clock 
noon  and  it  need  not  again  be  presented  on  the  next 
succeeding  business  day.  To  make  presentment  of  a  de- 
mand instrument  on  Saturday  or  to  wait  until  the  next 
succeeding  business  day  is  at  the  option  of  the  holder, 
but  if  the  presentment  is  made  on  Saturday  and  the 
instrument  is  dishonored,  the  notice  of  dishonor  must  be 
given  on  that  day  or  the  next  business  day.     (Sec.  194.) 

Time;  how  "Sec.  86.     Where  the  instrument  is 

computed.  payable    at   a   fixed    period    after   date, 

AFTER  SIGHT,  OR  AFTER  THE  HAPPENING  OF  A  SPECIFIED  EVENT, 
THE  TIME  OF  PAYMENT  IS  DETERMINED  BY  EXCLUDING  THE 
DAY  FROM  WHICH  THE  TIME  IS  TO  BEGIN  TO  RUN,  AND  BY  IN- 
CLUDING THE   DATE  OF  PAYMENT.'' 

To  deteiTQine  when  an  instrument  must  be  paid  if  it 
is  payable  at  a  fixed  number  of  days  after  date,  sight. 
or  the  happening  of  an  event  which  it  names,  the  day  of 
its  date,  sight,  or  of  the  happening  of  the  event  is  not 
included  but  the  last  day  of  the  period  for  which  it  is  to 
run  is  included  and  becomes  the  day  upon  which  pre- 
sentment for  payment  must  be  made,  unless  it  is  excus- 
ably delayed,  or  unless  it  is  a  Saturday,  Sunday  or  a  holi- 
day.   (Sec.  85.) 

"Sec.  87.     "Where  the  instrument  is 
Rule  where  ^ixde  payable  at  a  bank,^  it  is  equivalent 

pTyable^at  bank.  TO  an  order  to  the  bank  to  PAY  the  same 
"Illinois,  for  the  account  of  the  principal  debtor 

Nebraska,  thereon  . ' '" 

mSxiesoU.  When  an  instrument  is  made  payable 

^Missouri.  at  a  bank  the  effect  of  making  it  so  pay- 

able is  the  same  as  if  an  order  had  been  given  to  the 
bank  to  pay  it,  and  when  such  an  instrument  is  presented 
to  the  bank  named  it  is  obliged  to  pay  it  for  the  account 
of  the  principal  debtor  out  of  any  suflacient  funds  he  may 


148  THE  NEGOTIABLE  INSTRUMENTS  LAW         §  88 

have  to  the  credit  of  his  general  account  on  the  day  of 
its  maturity  Avhich  are  not  specially  applicable  to  another 
purpose.^"  An  instrument  so  made  payable  becomes  the 
equivalent  of  a  check.^^  Therefore,  if  an  instrument 
thus  payable  is  not  charged  to  the  account  of  the  party 
making  it  payable  at  a  bank  and  who  has  available  funds 
there  to  pay  it  at  maturity,  a  collecting  bank,  if  it  has  the 
instrument  for  collection,  would  be  liable  to  the  owner 
of  the  instrument  in  damages  if  a  loss  afterward  result 
from  its  neglect.  If  the  bank  at  which  such  an  instru- 
ment is  payable  has  the  instrument  as  holder,  for  its  own 
account,  its  failure  to  obtain  payment  out  of  the  funds 
appropriable  for  that  purpose  will  discharge  parties  sec- 
ondarily liable  upon  it.^^^  A  lesser  sum  than  the  full 
amount  due  upon  the  instrument  need  not  be  appropri- 
ated. 

What  constitutes       *'Sec.    88.      Payment   is    made    in   dub 

pasnnent  in  due    course  when  it  is  made  at  or  after  the 
course 

MATURITY  OF  THE  INSTRUMENT  TO  THB 
holder  thereof  in  good  FAITH  AND  WITHOUT  NOTICE  THAT 
HIS  TITLE  IS  DEFECTIVE.'' 

Payment  in  due  course  discharges  the  instrument  and 
relieves  the  person  making  payment  from  all  further 
obligation  upon  it.  (Sec.  119.)  It  is  made  in  due  course 
if  it  is  made  at  the  time  or  after  the  instrument  becomes 
due  and  payable  and  is  made  to  the  holder  or  to  some  per- 
son authorized  by  him  to  receive  pa^nnent.^^  Such  a  pay- 
ment will  discharge  the  person  obliged  to  pay  the  instru- 

37.  Commercial  Bank  vs.  Hennincer,  105  Pa.  St.  496. 
Bedford  Bank  vs.  Aeoain.  125  Ind.  584. 
German  Natl.  Bank  vs.  Foreman,  138  Pa.  St.  474. 

38.  Baldwin's  Bank  vs.  Smith,  215  N.  Y.  76. 

Aetna  Natl.  Bank  vs.  Fourth  Natl.  Bank,  46  N.  Y.  82,  88. 

38a.  Mechanics  &  Trader's  Bk.  vs.  Seitz,  150  Pa.  St.  632. 

39.  Madison  vs.  Cabalek,  86  111.  A.  450. 

Marling'  vs.  Nommensen,  127  Wise.  363,  106  N.   W.  844,  115 
Am.  S.  R.  1017,  5  L.  R.  A.  N.  S.  412,  7  Ann.  Cas.  364. 


§88  PRESENTMENT   FOR  PAYMENT  149 

ment  even  if  made  to  the  wrong  person  or  to  one  who  had 
no  title  to  the  instrument,  if  it  is  made  in  good  faith  and 
without  notice  of  any  deception,  or  defect  in  the  holder's 
title.^o 

But  payment  made  before  the  instrument  becomes  due 
is  not  payment  in  due  course  and,  if  made  to  the  wrong 
person  or  to  one  whose  title  to  the  instrument  is  de- 
fective, the  person  paying  it  is  not  discharged  from  lia- 
bility to  the  real  owner  of  the  instrument,  notwithstand- 
ing that  the  person  asking  payment  has  the  instrument 
in  his  possession  and  presents  it  for  payment.  A  pay- 
ment before  maturity  is  no  defense  against  a  bona  fide 
holder  and  the  payer  will  make  it  at  his  own  risk.^^  It 
binds  only  t.he  party  receiving  the  pa>Tnent. 

It  follows,  therefore,  that  one  liable  to  pay  an  instru- 
ment should  not  do  so  before  maturity  unless  he  has 
satisfied  himself  positively  that  the  person  asking  pay- 
ment is  entitled  to  receive  it.  You  will  please  refer  to 
Subdivision  8  for  the  general  subject  of  discharge  of  the 
instrument  and  discharge  of  parties. 

40.  Bambridge  vs.  Louisville,  83  Ky.  285,  4  Am.  S.  R.  153. 

41.  Williams  vs.  Keyes,  90  Mich.  290.  51  N.  W.  520,  30  Am.  S. 

R.  438. 
Watson  vs.  Wyman,  161  Mass.  96.  99 


150 


THE  NEGOTIABLE  INSTRUMENTS  LAW 


§89 


SUBDIVISION    VII, 


Notice  of  Dishonor. 


Section 


I  Section 


89 

90 
91 
92 

93 

94 

95 
96 
97 

98 

99 

100 

101 
102 

103 

104 


105 


To  whom  notice  of  dishonor 
must  be  given. 

By  whom  given. 

Notice  given  by  agent. 

Effect  of  notice  given  on  be- 
half of  holder. 

Effect  where  notice  is  given 
by  party  entitled  thereto.   109 

When   agent   may   give    no-   hq 
tiee. 

When  notice  sufficient. 

Form  of  notice. 

To    whom    notice    mav    be 


106 


107 


108 


111 
112 
113 


given. 

Notice  where  party  is  dead. 

Notice  to  partners. 

Notice  to  persons  jointly  li- 
able. 

Notice  to  bankrupt. 

Time    within    which    notice 
must  be  given. 

Where  parties  reside  in  same   ^^ 
place. 

Where  pai'ties  reside  in  dif-   118 
ferent  places. 


114 


115 


116 


When     sender     deemed     to 

have  given  due  notice. 
Deposit  in  post  office;  wL''t 

constitutes. 
Notice  by  subsequent  party ; 

time  of  giving. 
Where  notice  must  be  sent. 
Waiver  of  notice. 
Who  bound  by  waiver. 
Waiver  of  protest. 
When  notice  dispensed  with. 
Delay  in  giving  notice.  How 

excused. 
When    notice    need    not    be 

given  to  drawer. 
When    notice    need    not   be 

given  to  indorser. 
Notice       of       non-payment 

where  acceptance  refused. 
Effect   of   omission   to  give 

notice   of  non-acceptance. 
Protest;   when  need  not  be 

made ;  when  must  be  made. 


In  order  to  charge  the  parties  secondarily  liable  upon  a 
negotiable  instrument  they  must  be  given  notice  of  its 
•dishonor  by  non-payment  or  non-acceptance  unless,  by 
reason  of  the  exceptions  provided  in  the  Act,  the  notice 
may  be  dispensed  with.  The  giving  of  notice  is  made  an 
important  duty  and  any  oversight  or  omission  to  give  it 
promptly,  upon  dishonor  of  the  instrument,  or  a  neglect 
to  observe  the  necessary  formalities  in  giving  it  within 
the  time  provided  in  this  Act,  will  release  the  parties  en- 


§89  NOTICE  OF  DISHONOR  151 

titled  to  notice  and  they  cannot  again  be  made  liable  upon 
the  instrument  except  by  their  own  voluntary  act.^ 

The  following  sections  of  the  Act  prescribe  the  manner 
in  which,  the  time  at  which,  and  the  parties  to  whom  the 
notice  must  be  given,  as  well  as  by  whom,  and  every 
holder  is  obliged  to  observe  carefully  all  of  their  provi- 
sions upon  this  subject  if  he  would  save  his  rights  upon 
the  instrument.  He  is  required  to  act  with  promptness 
and  dispatch  when  called  upon  by  default  in  the  accept- 
ance or  payment  of  the  instrument  to  convey  the  infor- 
mation of  its  dishonor  to  the  secondary  parties  to  whom 
he  looks  for  its  payment,  unless  the  giving  of  the  notice  is 
dispensed  with  or  delay  in  giving  it  is  excused.  Tt  is  ap- 
parent, therefore,  that  a  knowledge  of  how  to  proceed 
upon  dishonor  of  the  instrument  is  very  essential  to  his 
safety. 

The  general  rule  in  regard  to  notice  applicable  to  the 
three  forms  of  negotiable  instruments  to  which  this  Act 
particularly  applies,  may  be  understood  to  be  this.  The 
holder  in  whose  hands  the  instrument  is  dishonored  is 
required  to  give  notice  to  every  party  whom  he  intends  to 
hold.  He  may  give  it  to  all  or  select  only  those  to  whom 
he  looks  for  payment,  even  if  they  be  quite  remote.  The 
notice  he  gives  will  fix  the  liability  of  the  parties  to  whom 
it  is  given  to  him  and  to  persons  claiming  through  him 
or  to  whom  he  is  liable,  and  to  all  parties  prior  to  the 
holder  who  have  a  right  of  recourse  against  the  parties 
notified.  Intermediate  and  prior  secondary  parties  to 
whom  notice  is  not  given  will  be  discharged.  Therefore, 
when  an  indorser  receives  notice  of  the  dishonor  of  the  in- 
strument he  ought,  for  his  own  protection,  himself  to  give 

1.     Aebi  vs.  Bank  of  Evansville,  124  Wise.  73,  102  N.  W.  329. 
Smith  vs.  Rowland,  18  Ala.  665. 


152  THE  NEGOTIABLE  INSTRUMENTS  LAW    §  89,  90 

notice  to  the  parties  to  whom  he  looks  for  payment.  The 
provisions  of  the  Act  in  respect  to  notice  are  as  follows : 

To  whom  notice  ' '  Sec.  89.  Except  as  herein  otherwise 
of  dishonor  must  provided,  when  a  negotiable  instrument 
be  given.  ^^^^  been  dishonored  by  non-acceptance 

OR  non-payment,  notice  of  dishonor  must  be  given  to 

THE  DRAWER  AND  TO  EACH  INDORSER,  AND  ANY  DRAWER  OR  IN- 
DORSER  TO  WHOM  SUCH  NOTICE  IS  NOT  GIVEN  IS  DISCHARGED." 

If  the  instrument  which  becomes  dishonored  by  non- 
acceptance  or  non-payment  is  a  bill  of  exchange  notice  of 
its  dishonor  must  be  given  to  the  drawer  and  to  each  in- 
dorser.  If  the  dishonor  is  of  a  promissory  note,  the  no- 
tice is  required  to  be  given  to  each  indorser.  The  maker 
is  not  entitled  to  notice. 
By  whom  given.        ' '  Sec  90.     The  notice  may  be  given  by 

OR  ON  behalf  of  THE  HOLDER,  OR  BY  OR  ON  BEHALF  OF  ANY 
PARTY  TO  THE  INSTRUMENT  WHO  MIGHT  BE  COMPELLED  TO 
PAY  IT  TO  THE  HOLDER,  AND  WHO,  UPON  TAKING  IT  UP,  WOULD 
HAVE  A  RIGHT  TO  REIMBURSEMENT  FROM  THE  PARTY  TO  WHOM 
THE   NOTICE  IS  GRTEN.  " 

The  person  who  ought  to,  and  who  usually  does  give 
the  notice  of  dishonor,  is  the  holder  of  the  instrument  at 
the  time  of  its  dishonor,  or  it  is  given  by  an  agent  act- 
ing for  him.  The  agent's  authority  need  not  be  in  writ- 
ing.- The  notice  may  be  given  by  any  party  or  by  any 
person  on  behalf  of  any  party  who  is  liable  upon  the  in- 
strument and  who  might  be  compelled  to  pay  it  to  the 
holder  and  would  thereupon  have  a  right  to  recover 
from  the  party  to  whom  the  notice  is  given.  And  a  party 
need  not  wait  until  he  himself  receives  notice  before  giv- 
ing notice  of  dishonor  to  other  parties  whom  he  desires 
to  hold.  He  may  give  the  notice  as  soon  as  he  becomes 
aware  of  the  dishonor  of  the  instrument,  no  matter  what 
his  source  or  means  of  information.  When  he  receives 
notice  of  the  dishonor  of  the  instrument,  however,  he 

2.     Utica  Bank  vs.  Smitli,  IS  Johns.  (K  Y.)  230. 


§91  NOTICE   OF  DISHONOR  153 

must  give  notice  to  other  parties  to  whom  he  looks  for 
payment  within  the  time  prescribed  in  this  Act  unless  he 
has  already  done  so  or  has  knowledge  that  the  holder  at 
the  time  of  dishonor  has  already  given  the  notice  to 
them. 

This  section  may  therefore  be  understood  to  mean 
that  all  parties  to  the  instrument,  except  those  primarily 
liable  and  those  not  entitled  to  receive  notice,  such  as 
one  for  whose  acconmiodation  the  instrument  is  made, 
may  give  notice  of  dishonor^  but  it  may  not  be  given  by 
a  stranger.  A  stranger  is  one  who  is  neither  a  party  nor 
the  representative  of  a  party  to  the  instrument,  and  this 
definition  includes  a  drawee  who  has  refused  to  accept 
and  a  party  who  has  been  discharged.^ 
Notice  given  by        "Sec.  91.     Notice  of  dishonor  may  be 

^S^^^-  GIVEN  BY  AN  AGENT  EITHER  IN  HIS  OWN  NAME 

OR  IN  THE  NAME  OF  ANY  PARTY  ENTITLED  TO  GIVE  NOTICE, 
WHETHER  THAT  PARTY  BE  HIS  PRINCIPAL  OR  NOT." 

When  the  notice  is  given  by  one  person  as  the  agent  of 
another,  he  may  give  it  in  his  own  name  or  he  may  give 
it  in  the  name  of  the  person  for  whom  he  is  acting.  He 
may  give  the  notice  in  the  name  of  any  other  party  who 
is  entitled  to  give  notice  even  if  the  party  in  whose  name 
he  gives  it  is  not  the  person  for  whom  he  is  acting  as 
agent,  but  if  given  in  a  wrong  name  it  is  not  a  sufficient 
notice.^  As  already  stated,  his  authority  need  not  be  in 
writing.^ 

3.  Traders  Natl.  Bank  vs.  Jones,  104  App.  Div.  433,  93  N.  Y.  Supp. 

768. 

4.  Rrailsford  vs.  Williams,  15  Md.  150,  74  Am.  D.  559. 
Lawrence  vs.  Miller,  16  N.  Y.  235. 

Payne  vs.  Patrick,  21  Tex.  680. 

Harrison  vs.  Rnscoe,  15  L.  J.  Exchg.  110,  15  M.  &  W.  231. 

Stanton  vs.  Blossom,  14  Mass.  116. 

5.  Cabot  Bank  vs.  Warner,  92  Mass.  522. 

6.  Utica  Bank  vs.  Smith,  IS  Johns.  (N.  Y.)  230. 


154  THE  NEGOTIABLE  INSTKUMENTS  LAW     §  92-94 

Effect  of  notice  ' '  Sec.  92.  Wheke  notice  is  given  by  ok 
given  on  behalf  qn  behalf  of  the  holder.,  it  enures  for 
of  holder.  ^^^  benefit  of  all  subsequent  holders 

AND  .\LL  PRIOR  PARTIES  WHO  HAVE  A  RIGHT  OF  RECOURSE 
AGAINST  THE  PARTY  TO  WHOM  IT  IS  GHT^N." 

If  the  notice  of  dishonor  is  given  by  the  holder,  or  by 
someone  for  him,  it  operates  for  his  benefit  and  for  the 
benefit  of  all  persons  who  aftenvard  become  holders  of 
the  instrument.  It  operates  also  for  the  benefit  of  all 
parties  before  the  holder  giving  notice  who  have  a  right 
to  enforce  the  instrument  against  the  parties  to  whom  the 
notice  is  given.  In  other  words,  when  the  holder  has 
given  notice  of  dishonor  to  all  the  parties  to  whom  it  is 
required  to  be  given  it  is  not  necessary  that  any  other 
party  give  it.  The  notice  by  the  holder  operates  for  the 
benefit  of  all,*^  but  he  is  bound  only  to  give  it  to  his  im- 
mediate indorser  if  he  looks  to  him  alone  for  recourse.* 

Effect  where  ' '  Sec.  93.    Where  notice  is  given  by  or 

notice  is  given  ON  BEHALF  OF  a  PARTY'  entitled  to  give  no- 
by  party  entitled  ^ice,  it  enures  for  the  benefit  of  the 
thereto.  holder  and  all  parties  subsequent  to  the 

PARTY  TO  WHOM  NOTICE  IS  GIVEN." 

If  the  notice  is  given  by  a  party  to  the  instrument  who 
is  not  the  holder  but  who  is  entitled  to  give  notice,  or  if  it 
is  given  by  someone  for  him,  the  notice  operates  for  the 
benefit  of  the  holder  of  the  instrument  as  well  as  for  all 
who  became  parties  after  that  one  to  whom  the  notice  is 
given.  It  thus  fixes  the  liability  to  them  of  the  party  to 
whom  the  notice  is  given  and  fixes  it  as  well  to  that 
party  from  whom  he  receives  the  notice. 
When  agent  may  ''Sec  94.  Where  the  instrument  has 
give  notice.  been    dishonored    in    the    hands    of    an 

AGENT,  HE  MAY  EITHER  HIMSELF  GIVE  NOTICE  TO  THE  PARTIES 
LIABLE  THEREON,  OR  HE  MAY  GIVE  NOTICE  TO  HIS  PRINCIPAL. 

7.  Ti-aders  Natl.  Bank  vs.  Jones,  104  App.  Div.  433,  93  N.  Y.  Supp. 

768. 

8.  West  River  Bank  vs.  Taylor,  34  N.  Y.  128,  131. 
Linn  vs.  Horton,  17  Wise.  157. 


§95  NOTICE   OF  DISHONOR  155 

If  he  give  notice  to  his  principal,  he  must  do  so  within 

THE  SAME  time  AS  IF  HE  WERE  THE  HOLDER,  AND  THE  PRIN- 
CIPAL, UPON  THE  RECEIPT  OF  SUCH  NOTICE,  HAS  HIMSELF  THE 
SAME  TIME  FOR  GIVING  NOTICE  AS  IF  THE  AGENT  HAD  BEEN 
AN   INDEPENDENT    HOLDER." 

If  the  instrument  is  in  the  hands  of  an  agent  at  the 
time  of  its  dishonor,  a  collecting  bank  for  example,  the 
agent  may  give  notice  of  its  dishonor  to  the  parties  liable 
upon  it  or  he  may  give  the  notice  to  his  principal  alone.^ 
If  the  agent  gives  the  notice  he  must  do  it  within  the  time 
fixed  in  Sections  103  and  104.  If  he  fails  to  give  his 
principal  notice  within  the  time  in  which  it  is  required 
to  be  given  his  neglect  will  be  imputable  to  his  principal 
and  will  destroy  his  principal's  right  to  give  notice,  not- 
withstanding that  after  receiving  notice  from  his  agent, 
the  principal  may  give  or  attempt  to  give  the  notice  to 
his  prior  parties  within  the  time  prescribed  in  this  Act.^*^ 
A  collecting  bank  will  be  liable  to  its  customer  if  it  fails 
in  this  respect.^ ^  A  collecting  agent  ought  not  to  take 
anything  but  money  in  payment  of  the  instrument,  but 
if  it  receives  a  check  which  afterward  proves  to  be  worth- 
less, it  must  at  once  proceed  to  give  notice  of  dishonor 
and  it  must  do  this  within  the  time  required  in  this  sub- 
division of  the  Act,^-  Upon  receiving  the  notice,  the 
principal,  that  is,  the  person  for  whom  it  is  acting,  must 
in  turn  give  the  notice  within  the  prescribed  time  after 
receiving  notice  from  his  agent. 

When  notice  "Sec.  95.    A  written  notice*  need  not 

sufficient.  ^^  signed,  and  an  insufficient  written' 

"Kentucky. 

notice   may  be   supplemented  and  vali- 
dated BY  verbal  communication.     A  misdescription  of 

9.  Gleason  vs.  Thayer,  87  Conn.  248. 
Shea  vs.  Vahev,  215  Mass.  80. 

10.  Rosson  vs.  Carroll,  90  Tenn.  90. 

Sampson  vs.  Turnev,  5  Hump.    (Tenn.),  419,  42  Am.  D.  443. 

11.  Brill  vs.  Jefferson  Bank,  159  App.  Div.  (N.  Y.)  461. 

12.  Young  vs.  Exchanije  Bank,  152  Ky.  293,  153  S.  W.  444,  Ann. 

Cas.  1915  B.  148. 


156  THE  NEGOTIABLE  INSTRUMENTS  LAW    §  95,  96 

THE  INSTRUMENT  DOES  NOT  VITIATE  THE  NOTICE  UNLESS  THE 
PARTY  TO  WHOM  THE  NOTICE  IS  GIVEN  IS  IN  FACT  MISLED 
THEKEBi'/' 

The  person  giving  written  notice  of  dishonor  need  not 
sign  it.  If  he  fails  to  do  so  and  the  notice  contains  all 
the  requirements  of  the  next  section,  it  is  nevertheless 
good. 

If  a  written  notice  omits  any  of  the  requirements  of 
the  next  section  they  may  be  supplied  by  verbal  com- 
munication and  this  will  make  good  a  notice  which  would 
otherwise  be  invalid.  If  the  notice  incorrectly  describes 
the  instrument  dishonored  it  is  not,  for  that  reason,  in- 
valid unless  the  party  to  whom  it  is  given  is  actually 
misled  by  the  mistake. 

Form  of  notice.  '*Sec.  96.     The  notice  may  be  in  weit- 

"Kentucky.  ^^^  q^  merely  oral*^  and  may  be  gi\'en  in 

any  terms  which  sufficiently  identify  the  instrument, 
and  indicate  that  it  has  been  dishonored  by  non-ac- 
CEPTANCE OR  NON-PAYMENT.  It  MAY  IN  ALL  CASES  BE  GIVEN 
BY  DELIVERING  IT  PERSONALLY  OR  THROUGH  THE   MAILS." 

Notwithstanding  that  the  preceding  section  will  permit 
the  correction  of  any  mistake  in  the  written  notice  if  the 
party,  receiving  it  has  not  been  misled  by  the  mistake, 
care  must  be  used  in  preparing  the  notice,  and  it  should 
correctly  describe  the  date,  amount  and  nature  of  the 
instrument,  by  whom  made  or  accepted  and  indorsed, 
and  distinctly  state  the  fact  that  it  was  presented  for 
payment  or  acceptance,  as  the  case  may  be,  and  that 
pajTnent  or  acceptance  was  demanded  and  was  refused. 
It  should  also  show  by  whom  the  notice  is  given,  state 
where  the  dishonored  instrument  is  held  and  the  names 
of  all  parties  to  whom  notice  of  its  dishonor  has  been 
given.  However,  the  terms  of  the  notice  are  not  pre- 
scribed by  the  Act  in  any  particular.  Any  words  may  be 
written  or  spoken  to  the  party  to  be  notified  which  de- 
scribe the  instrument  well  enough  to  enable  him  to  iden- 


§97  NOTICE   OF  DISHONOR  157 

tify  it  and  clearly  make  him  understand  that  the  instru- 
ment has  not  been  accepted  or  paid  upon  presentment, 
as  the  case  may  be,  and  that  the  holder  looks  to  him  for 
pajanent.^^  The  reasons  given  by  the  party  refusing 
to  accept  or  pay  the  instrument  need  not  be  stated  in  it 
but  they  may  be  for  the  information  of  the  party  notified. 
If  the  instrument  is  protested,  however,  the  cause  of 
protest  and  the  reason  given  for  non-payment  or  non- 
acceptance  must  be  stated  in  the  protest.  (See  Sec.  153.) 
The  notice  may  be  given  personally  or  sent  through 
the  mails  and  when  the  addresses  of  all  parties  to  be 
notified  are  known  to  the  holder,  he  will  encounter  no 
difficulty  in  sending  the  notices  promptly  and  properly. 
When  the  parties  or  their  addresses  are  unknown  to  the 
holder  it  is  the  very  general  custom  to  make  out  as  many 
copies  of  the  notice  as  there  are  separate  parties  to  be 
notified  and  send  them  all  to  the  immediate  party  froin 
whom  the  holder  obtained  title.  He  in  turn  will  forward 
the  notices  to  the  next  before  him  and  so  on  back  to  the 
party  who  originally  negotiated  the  instrument.  It  is 
entirely  proper  to  do  this.^^  Each  party  who  receives 
notice  is  entitled  under  Sec.  107,  to  the  same  time  for  giv- 
ing notice  to  parties  liable  to  him  as  the  holder  .has  in 
whose  hands  the  instrument  meets  with  dishonor.  A 
notice  given  by  telephone  is  good  if  it  is  clearly  shown 
that  the  party  to  be  notified  was  communicated  with.^^ 

To  whom  notice  *'Sec.  97.  Notice  of  dishonor  may  be 
may  be  given.  given  either  to  the  party  himself  or  to 
HIS  agent  in  that  behalf.'^ 

The  notice  of  dishonor  may  be  given  to  the  party  to 
be  notified  or  to  an  agent  who  has  authority  from  him  to 

13.  Zollner  vs.  Moffitt,  222  Pa.  644,  72  Atl.  235. 

14.  Oaklev  vs.  Carr,  66  Nebr.  751,  92  N.  W.  1000,  103  Am.  S.  R. 

739,  60  L.  R.  A.  431. 

15.  American  Nat'l  Bank  vs.  Fertilizer  Co.,  125  Tenn.  328, 
337,  143  S.  W.  597. 


158  THE  NEGOTIABLE  INSTRUMENTS  LAW  §  97 

receive  it.  The  words  ' '  his  agent  in  that  behalf ' '  do  not 
permit  that  notice  of  the  dishonor  of  the  instrument  be 
given  to  a  party  by  communicating  the  fact  of  its  dis- 
honor to  some  person  who  is  a  mere  employe  or  one  who 
is  his  agent  in  other  matters  unless  the  agent  acts  for 
him  in  such  a  capacity  as  w^ill  justify  the  person  gi\^ng 
the  notice  in  believing  that  the  agent  is  authorized  to 
act  for  his  principal  in  the  matter  of  the  dishonored 
instrument.  Thus,  a  notice  to  an  agent  who  is  clothed 
with  general  authority  to  conduct  his  principal's  busi- 
ness would  be  proper  and  sufficient.^*' 

Ordinarily  the  words  ''in  that  behalf"  mean  "for  that 
purpose"  and  if  the  person  giving  notice  of  the  dishonor 
of  a  negotiable  instrument  does  not  know  and  has  not 
sufficient  reason  to  think  that  the  agent  to  whom  ,he 
contemplates  giving  the  notice  has  authority  to  act  for 
hi's  principal  in  behalf  of  the  dishonored  instrument,  or 
if  an  ordinarily  prudent  man  would  have  reason  to  doubt 
his  authority,  the  notice  should  not  be  given  to  the  agent 
but  should  be  given  to  the  principal,  either  personally 
or  by  mail.  Notice  given  to  an  attorney  or  to  a  ser\^ant 
is  usually  insufficient  unless  it  is  shown  that  the  attorney 
or  servant  was  expressly  or  impliedly  authorized  to  re- 
ceive it  by  the  person  sought  to  be  charged/"  but  it  has 
been  held  that  a  notice  given  to  an  agent  who  has  author- 
ity to  indorse  negotiable  paper  will  be  sufficient.^®  Avoid 
giving  notice  of  dishonor  to  an  agent  unless  satisfied 
that  he  is  authorized  by  the  party  to  be  notified  to  act 
for  him  in  regard  to  the  dishonored  instrument.  Costly 
delay  may  ensue,  and  remember  that  although  a  second- 

16.  Kinc:  vs.  Grisri^s,  82  Minn.  387,  85  N.  W.  162. 

17.  Amer.  Natl.  Bank  vs.  Fertilizer  Co.,  125  Tenn.  328,  143  S.  W. 

597. 
N.  Y.,  etc.,  Contr.  Co.  vs.  Selma  Savings  Bank,  51  Ala.  305. 

18.  N.  Y.,  etc..  Contr.  Co.  vs.  Selma  Savin<?s  Bnk.,  51  Ala.  305,  306. 
Froth  vs.  Thrush,  8  Bam.  &  Cress.  387. 


§98  NOTICE   OF  DISHONOR  159 

ary  party  may  actually  know  of  the  dishonor,  he  will  be 
released  from  liability  upon  the  instrument  if  that  knowl- 
edge is  not  communicated  to  him  within  the  time  pre- 
scribed in  this  Act.     (Sec.  108.) 

Notice  where  ''Sec.   98.     When  any  party  is  dead, 

party  is  dead.        ^^^j^   -g-jg  death  is  known   to   the  party 

GIVING  NOTICE,  THE  NOTICE  MUST  BE  GIVI^N 
TO  A  personal  REPRESENTATIVE,  IF  THERE  BE  ONE,  AND  IF 
WITH  REASONABLE  DILIGENCE  HE  CAN  BE  FOUND.  If  THERE 
BE  NO  PERSONAL  REPRESENTATIVE,  NOTICE  MAY  ^  BE  SENT  TO 
THE  LAST  RESIDENCE  OR  THE  LAST  PLACE  OF  BUSINESS  OF  THE 
DECEASED.'' 

If  the  party  who  is  to  be  notified  is  dead  and  the  per- 
son giving  the  notice  knows  that  he  is  dead,  ,he  must  use 
reasonable  diligence  to  find  and  notify  the  personal  rep- 
resentative of  the  deceased  party.  Eeasonable  diligence 
has  been  defined  to  be  that  degree  of  diligence  M^hich  busi- 
ness men  usually  exercise  when  their  own  interests  de- 
pend upon  obtaining  correct  information.  If  the  party 
giving  notice  is  not  aware  of  the  death  of  the  party  to  be 
notified,  a  notice  given  in  the  usual  manner  as  to  a  living 
person  at  his  last  known  residence  or  place  of  business 
is  sufiicient.^^  AVhat  is  said  under  Sec.  76  in  regard  to 
presentment  where  the  party  is  dead  to  whom  present- 
ment for  payment  must  be  made  applies  also  to  giving 
notice  of  dishonor  under  such  circumstances.  If  the  rep- 
resentative of  the  deceased  party  prove  to  be  one  who  is 
himself  a  party  to  the  instrument  in  his  individual  ca- 
pacity and  as  such  entitled  to  notice,  the  notice  should 
be  given  to  him  both  as  an  indi\ddual  and  in  his  repre- 
sentative capacity,  although  knowledge  of  dishonor 
gained  through  the  notice  given  to  him  in  his  representa- 
tive capacity  has  been  held  to  be  the  equivalent  of  indi- 
vidual notice.^" 

19.  Goodnow  vs.  Warren,  122  Mass.  82. 
Liudeniau's  Executor  vs.  Guildin,  34  Pa.  St.  54. 

20.  Count  vs.  Thompson  (Eng.),  7  C.  B.  400,  62  E.  C.  L.  400,  137 

Reprint  159. 


160  THE  NEGOTIABLE  INSTRUMENTS  LAW.§  99, 100 

Notice  to  "Sec.  99.     Where  the  paeties  to  be 

pa   ners.  notified  are  partners^  notice  to  any  one 

PARTNER  IS  NOTICE  TO  THE  FIRM  EVEN  THOUGH  THERE  HAS 
BEEN  A  DISSOLUTION.'' 

Partners  who  are  liable  upon  the  instrument  as  such 
are  not  indi\adually  entitled  to  notice  even  if  at  the  time 
notice  is  to  be  given  the  partnership  has  been  dissolved. 
Notice  to  one  partner  is  notice  to  all  and  to  the  firm.^^ 
The  fact,  however,  that  two  or  more  persons  who  are 
parties  to  an  instrument  and  entitled  to  notice  are  en- 
gaged in  business  as  partners  will  not  excuse  notice  to 
each  if  they  are  not  liable  upon  the  instrument  as  part- 
ners. Unless  their  liability  is  clearly  as  a  firm  notice 
of  dishonor  must  be  given  to  each,  and  if  one  signs  as 
maker  and  the  other  as  indorser,  the  latter  cannot  be 
held  to  his  indorsement  unless  notice  of  dishonor  is 
given  to  him.^^ 

Notice  to  ''Sec.    100.      Notice   to   joint  parties 

persons  jointly  ^y^^^  ^^j,  j^.^^  partners  must  be  given  to 
hable. 

each    of   them,   unless   one    of   them    HAS 

authority  to  receive  such  notice  for  the  others.'' 
When  two  or  more  persons  who  are  not  partners  are 

jointly  liable  upon  the  instrument,  notice  of  its  dishonor 
must  be  given  to  each  of  them  unless  one  has  authority 
to  accept  notice  for  the  others.  This  is  a  situation  which 
requires  care  in  the  act  of  giving  notice  of  dishonor,  but 
all  difficulty  will  be  avoided  if  the  notice  is  given  prompt- 
ly to  each  of  the  parties  without  regard  to  Avhether 
they  are  jointly  or  severallj^  liable  upon  the  instrument. 
Joint  indorsers  who  receive  notice  are  not  released  by 
failure  of  the  holder  to  give  notice  to  all  and  may  them- 
selves give  notice  to  those  who  indorsed  jointly  with 
them  and  thus  preserve  their  right  to  contribution.-^  The 

21.  AVheeler  vs.  Maillott  &  Co.,  20  La.  Ann.  75. 

22.  Folaiul  vs.  Boyd.  23  Pa.  St.  476. 

23.  AYilliams  vs.  Paintsville  Natl.  Bank,  143  Kv.  781,  137  S.  W. 

535,  Ann.  Cas.  1912  D.  350. 


§101-103  NOTICE  OF  DISHONOR  161 

.holder  will  be  required,  however,  to  look  only  to  those 
to  whom  he  gives  notice.     (Sec.  89.) 

Notice  to  "Sec.  101.     Where  a  party  has  been 

bankrupt.  adjudged  a  bankrupt  or  an  insolvent,  or 

HAS  MADE  AN  ASSIGNMENT  FOR  THE  BENEFIT  OF  CREDITORS, 
NOTICE  MAY  BE  GIVEN  EITHER  TO  THE  PARTY  HIMSELF  OR  TO 
HIS  TRUSTEE  OR  ASSIGNEE. ' ' 

Notice  to  a  bankrupt,  or  to  an  insolvent  who  has  made 
an  assignment  for  the  benefit  of  his  creditors,  is  properly- 
given  if  it  is  either  given  to  the  bankrupt  or  insolvent  or 
is  given  to  the  trustee  appointed  in  the  bankruptcy  pro- 
ceedings or  the  assignee  of  the  insolvent,  and  it  must  be 
given  to  one  or  the  other. 

Time  within  "Sec.  102.    Notice  may  be  given  as  soon 

which  notice  ^g  ^^^  instrument  is  dishonored:  and  un- 
must  be  given. 

less  delay  is  excused  as  hereinafter  pro- 
vided, must  be  given  witfiin  the  times  fixed  by  this 

ACT. ' ' 

It  is  provided  here  that  the  notice  may  be  given  at  once 
upon  dishonor  of  the  instrument,  and  that  if  it  is  not 
done  immediately  it  must  be  given  within  the  time  fixed 
in  this  Act.  The  next  two  sections  fix  the  time  within 
which  the  notice  must  be  given  and  in  Section  113  will  be 
found  the  circumstances  which  excuse  delay  in  giving  it. 
Where  parties  "Sec.  103.     Where  the  person  giving 

reside  in  same  ^^^  r^^^  person  to  receive  notice  reside 
place. 

"Rhode  Island       ^-^  '^-^■^  same  place,  notice  must  be  given 
within  the  following  times: 

1.  If  given  at  the  place  of  business  of  the  person  to 

RECEI\T1    notice,    it    MUST    BE    GIVEN    BEFORE    THE    CLOSE    OF 

business  hours  on  the  day  following. 

2.  If  given  at  his  residence,  it  must  be  given"  before 
the  usual  hours  of  rest  on  the  day  following. 

3.  If  sent  by  mail,  it  must  be  deposited  in  the  post- 
office  in  time  to  reach  him  in  usual  course  on  the  day 
following.  ' ' 

When  delay  is  not  excused  by  some  circumstance  men- 
tioned in  Section  113,  the  notice  must  be  given  at  the 


162  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  104 

times  provided  in  this  section  when  the  party  giving 
and  party  entitled  to  receive  the  notice  reside  in  the 
same  place.  The  designation  "same  place"  may  he  un- 
derstood to  mean  the  same  city,  or  village,  or  the  same 
business  community  outside  of  a  city  or  village  in  which 
the  usual  business  transactions  between  persons  who  re- 
side there  are  conducted  by  personal  interchange,  and  not 
coimnonly  by  the  use  of  the  mails.  The  term  "same 
place"  can  not  be  described  as  having  any  definite,  fixed 
boundaries  and  to  avoid  any  question  of  the  sufficiency 
of  tlie  notice  it  should,  whenever  possible,  be  given  per- 
sonally or  by  messenger  upon  the  day  of  or  the  day  after 
dishonor,  or  ])e  deposited  in  the  mail  upon  the  day  the 
instrument  is  dishonored  or  the  next  day. 

If  the  notice  is  given  at  the  residence  of  the  party  to  be 
notified  it  must  be  given  before  the  usual  hours  of  rest 
on  the  day  folloA\ang  the  day  of  dishonor.  If  it  is  sent  by 
mail  it  nmst  be  deposited  in  the  postoffice  in  time  to 
reach  him  before  the  close  of  business  if  addressed  to  his 
place  of  business,  and  if  addressed  to  his  residence  it 
must  be  delivered  there  before  the  usual  hours  of  rest 
on  tlie  day  following  the  day  of  dishonor  and  it  is  of  no 
importance  that  he  was  not  there  to  receive  it.-^  The 
notice  may  be  communicated  by  telephone  within  the 
same  time,  except  in  Kentucky,  where  it  is  required  to 
be  in  writing. 
Where  parties  "Sec,  104.     Where  the  person  givixg 

reside  in  ^-v^j^   rpj^^   perSOK    TO   receive    NOTICE   RESIDE 

different  nlaces. 

^  ix  different  places,  the  notice  must  be 

gi\t1n  within  the  foli.owing  times: 

1.  If  sent  by  mail,  it  must  be  deposited  in  the  post- 
office  IN  TIME  TO  GO  BY  MAIL  THE  DAY  FOLLOWING  THE  DAY 
OF  DISHONOR,  OR  IF  THERE  BE  NO  MAIL  AT  A  CONVENIENT  HOUR 
ON  THAT  DAY,  BY  THE  NEXT  MAIL  THEREAFTER. 

24.     Wilson  vs.  Peck.  121  X.  Y.  Supi).  344. 
Adams  vs.  Wright,  14  Wise.  408. 


§  105  NOTICE   OF  DISHONOR  163 

2.  If  given  otherwise  than  through  the  postoffice^ 
then  within  the  time  that  notice  would  have  been  re- 
ceived in  due  course  of  mail.  if  it  had  been  deposited  in 
the  postoffice  within  the  time  specified  in  the  last 
SUBDIVISION.     (Sub-section  1  of  this  section.)" 

The  notice  may  be  sent  and  delivered  by  mail  by  one 
person  to  another  when  they  reside  in  different  places, 
and  if  it  is  given  in  this  manner  it  must  then  be  deposited 
in  the  postoffice  on  or  before  the  day  following  the  day 
of  dishonor  in  time  to  go  by  the  last  mail  on  that  day.  If 
the  only  mail  on  the  day  after  the  day  of  dishonor  is  very 
early  or  there  is  none  at  a  convenient  hour,  which  may 
be  understood  to  be  at  or  after  the  beginning  of  business 
on  that  day,  the  notice  must  be  deposited  in  time  to  go  by 
the  first  mail  thereafter.-^"  The  mails  contemplated  to 
be  used  are  the  mails  at  the  place  of  dishonor,  or  at  the 
place  where  a  party  himself  receiyes  notice  of  dishonor 
who  desires  to  notify  other  parties  by  mail. 

If  the  notice  is  given  by  delivery  in  any  manner  other 
than  through  the  postoffice,  or  is  given  by  telegraph  or 
communicated  by  telephone,  it  must  be  given  within  the 
time  that  it  would  have  been  received  if  it  had  been  sent 
through  the  mails  and  within  the  time  above  prescribed, 
and  these  means  may  be  used  to  correct  a  failure  to  give 
timely  notice  by  mail  or  otherwwise.^^^  Notice  of  dis- 
honor actually  received  by  the  party  to  be  notified,  but 
not  given  within  the  time  provided  in  this  Act,  will  not  be 
valid  and  will  not  bind  any  party  w^hom  it  is  sought  to 
hold  upon  the  instrument.     Section  108  so  provides. 

When  sender  ''Sec.  105.     Where  notice  of  dishonor 

deemed  to  have  jg  dxjly  addressed  and  deposited  in  the 
given  due  no  ice.  pqstoffice,  the  sender  is  deemed  to  have 
given  due  notice,  notwithstanding  any  miscarriage  in 
the  mails.  ' ' 


24a.  Smith  vs.  Poillon.  87  N.  Y.  590,  597. 

24b.  Jnr<]:er.s  vs.  Wickman,  124  App.  Div.  (N.  Y.),  531. 


164  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  106 

A  notice  properly  addressed  and  deposited  in  the  post- 
office  but  unstamped  or  insufficiently  stamped,  and  for 
that  reason  undelivered,  would  not  be  deemed  to  have 
been  duly  given,  unless  it  was  actually  received  within 
the  time  required  in  Sections  103  and  104.  While  an  un- 
stamped letter  or  one  with  insufficient  postage  may  some- 
times be  delivered  and  it*  delivered  would,  of  course, 
carry  binding  notice,  a  failure  of  its  delivery  would  be 
due  to  the  sender's  own  neglect  and  delay  in  the  receipt 
of  a  notice  so  sent  would  not  be  excused.^'' 

Deposit  in  "Sec.  106.     Notice  is  deemed  to  have 

postoffice;  what    ^^^^^  deposited   in   the  postoffice  when 
constitutes. 

deposited  in  any  branch  postoffice  or  in 

ANY  letter  box  UNDER  THE  CONTROL  OF  THE  POSTOFFICE  DE- 
PARTMENT." 

Letter  boxes  sup])lied  and  placed  by  the  postoffice  de- 
partment, or  such  as  are  under  its  control  and  used  by 
the  department  for  the  collection  of  mail  at  regular  in- 
tervals are  contemplated  by  this  section  of  the  Act  and 
not  such  private  receptacles  as  are  provided  by  persons 
residing  upon  rural  free  delivery  routes,  or  private  mail 
boxes  in  cities.-''  The  notice  must  be  deposited  in  a  post- 
office,  a  branch  postoffice  or  an  official  letter  box  from 
which  mail  matter  is  collected  by  a  mail  carrier  at  reg- 
ular intervals.  If  the  notice  is  delivered  by  the  sender 
to  a  mail  carrier  for  deposit  in  the  postoffice  and  he 
neglects  to  deposit  it  there  in  time,  the  notice,  it  has  been 
held,  is  not  deemed  to  have  been  duly  given.  On  the  other 
hand,  it  has  also  been  held  that  since  the  U.  S.  postal 
regulations  require  carriers  to  receive  prepaid  letters 
tendered  to  them  for  mailing,  a  letter  delivered  to  a 
mail  carrier  is  considered  to  be  the  equivalent  of  its 

25.  Bank  vs.  Miller,  139  Wise.  126. 

26.  Wilson  vs.  Peck,  121  N.  Y.  Supp.  344. 
Townsend  vs.  Auld,  10  Misc.  (N.  Y.)  343. 


§  107,  108  NOTICE  OF  DISHONOR  165 

deposit  in  a  postoffice.  The  Act  seems,  however,  to  re- 
quire that  the  notice  must  be  placed  in  tlie  postoffice, 
branch  postoffice  or  letter  box  by  the  sender,  and  its  au- 
thor has  stated,  in  the  latest  edition  of  his  book,  that  it 
was  not  deemed  wise  to  adopt  the  rule  that  delivery  to  a 
letter  carrier  is  sufficient.-''' 

Notice  by  subse-  ' '  Sec.  107.  Wheee  a  party  receives  no- 
quent  party;  time  ^j(^ J,  qp  dishonor,  he  has,  after  the  re- 
01  giving. 

CEIPT  of  such  notice,  THE  SAME  TIME  FOR 
GIVING  NOTICE  TO  ANTECEDENT  PARTIES  THAT  THE  HOLDER  HAS 
AFTER  THE  DISHONOR." 

A  party  who  receives  notice  of  dishonor  is  allowed  by 
this  section  the  same  time  for  himself  giving  notice  to 
parties  liable  upon  the  instrument  to  and  before  him, 
as  the  holder  has  under  Sections  103,  104,  105  and  106, 
and  he  must  observe  all  the  requirements  of  those  sec- 
tions in  giving  it.  For  the  provisions  of  the  Act  concern- 
ing the  form  of  the  notice  see  Section  96. 

Where  notice  "Sec.  108.     Where  a  party  has  added 

must  be  sent.         ^>^t   address   xo   his  signature,   notice   of 

DISHONOR   must   BE   SENT    TO    THAT   ADDRESS;   BUT   IF    HE   HAS 

not  given  such  address,  then  the  notice  must  be  sent 
as  follows  : 

1.  Either  to  the  postoffice  nearest  to  his  place  of 
residence,  or  to  the  postoffice  where  he  is  accustomed 

TO  RECEI\T:  HIS  LETTERS  ;  OR, 

2.  If  HE  LIVE  IN  OKE  PLAGE,  AND  HAVE  HIS  PLACE  OF  BUSI- 
NESS IN  ANOTHER,  NOTICE  MAY  BE  SENT  TO  EITHER  PLACE  ;  OR, 

3.  If  HE  IS  SOJOLTRNING  IN  ANOTHER  PLACE,  NOTICE  MAY 
BE  SENT  TO  THE  PLACE  WHERE  HE  IS  SO  SOJOURNING. 

But  WHERE  THE  NOTICE  IS  ACTUALLY  RECEIVED  BY  THE 
PARTY  WITHIN  THE  TIME  SPECIFIED  IN  THIS  ACT,  IT  WILL  BE 
SUFFICIENT,  THOUGH  NOT  SENT  IN  ACCORDANCE  WITH  THE 
REQUIREMENTS  OF  THIS  SECTION." 

The  place  to  which  the  notice  must  be  sent  is  of  the 
utmost  importance.     When  the  party  to  be  notified  has 

27.     Crawford's  Ann.  Neg-.  Inst's  Law,  4th  Edn.  p.  180,  Note  to 
Sec.  106. 


166  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  108 

added  an  address  to  his  signature,  the  notice  must  be  sent 
to  or  given  at  that  address  even  though  he  may  not  be 
there  to  receive  it,  or  it  is  not  the  address  at  which  he 
usually  receives  his  mail.^*  If  he  has  given  no  address 
a  reasonable  effort  must  be  made  to  find  him,  that  is  to 
say,  the  holder  must  make  diligent  effort  to  learn  his 
place  of  residence  or  usual  place  of  business  by  making 
inquiry  among  persons  most  likely  to  know  it,^^  and  if 
the  notice  is  sent  by  mail,  it  must  be  addressed  to  the 
postoffice  at  the  place  where  he  lives  or  does  business  or 
the  one  nearest  that  place,  or  to  the  postoffice  at  which 
he  usually  gets  his  mail,  if  it  is  known.  If  the  party 
lives  at  one  town  and  has  his  usual  place  of  business  at 
another,  each  of  which  is  a  postoffice,  the  notice  may  be 
sent  to  either  place. 

If  he  is  temporarily  absent  from  his  usual  place  of 
business  or  residence  at  the  time  the  notice  is  to  be  given 
and  the  person  who  is  to  give  it  knows  his  temporary 
address,  the  notice  may  be  addressed  and  sent  to  him 
at  that  place.^^  But,  ordinarily,  this  should  not  be  done. 
The  notice  ought  to  be  addressed  and  sent  to  the  party 
at  his  usual  place  of  business  or  residence  although  the 
holder  knows  his  temporary  address  and  knows  that  the 
notice  would  be  delivered  at  the  temporary  address.  If 
a  notice  sent  to  one  at  the  place  where  he  is  temporarily 
sojourning  is  not  received  by  him  it  is  good  if  sent  in 
time,  but  it  is  not  considered  that  one  engaged  in  business 
who  is  absent  from  his  usual  place  of  business  is  ordinar- 
ily as  well  able  to  attend  to  the  affaii's  of  business  at  his 
place  of  temporary  sojourn  as  he  would  be  at  his  usual 

28.  Lankofsky  vs.  Raymond,  217  Mass.  98.  104  N.  E.  489. 

29.  Dupont  Towder  Co.  vs.  Roonev.  63  Misc.  344.  117  N.  Y.  S.  220. 
Albany  Tr.  Co.  vs.  Frothiuoham,  50  Misc.  598,  99  N.  Y.  S.  343. 
Hazlett  vs.  Bragdon,  7  Pa.  Super.  581. 

30.  Lowell  Trust  Co  vs.  Pratt,  183  Mass.  379.  381,  67  N.  E.  363. 


§109  NOTICE  OF  DISHONOR  167 

place  of  business  or  residence,  it  being,  besides,  more  rea- 
sonable to  suppose  that  lie  will  leave  someone  in  town  to 
attend  to  his  business. -^^ 

The  notice  ought  not,  therefore,  to  be  sent  to  the  place 
where  the  party  to  be  notified  is  sojourning  unless  the 
sender  has  made  diligent  inquiry  to  learn  his  temporary 
address  and  is  sure  of  its  ijrompt  delivery  there,  or  unless 
requested  by  the  party  to  do  so. 

Actual  notice  received  by  the  party  to  be  charged  is 
good  and  will  bind  him  if  he  receives  it  within  the  time 
provided  in  this  Act,  although  it  may  not  have  been  sent 
in  accordance  with  the  above  section,  and  this  is  so  not- 
withstanding that  the  section  seems  to  be  mandatory  in 
its  specific  provisions. 
Waiver  of  notice.      ' '  Sec.  109.     Notice  of  dishonor  may  be 

WAIVED,  EITHER  BEFORE  THE  TIME  OF  GIVING  NOTICE  HAS  AR- 
RIVED, OR  AFTER  THE  OMISSION  TO  GIVE  DUE  NOTICE,  AND  THE 
WAIVER  MAY  BE  EXPRESS  OR  IMPLIED. ' ' 

A  party  who  would  otherwise  be  entitled  to  receive  no- 
tice may  waive  this  right  at  the  time  he  becomes  a  party 
to  the  instrument  or  at  any  other  time  before,  at,  or  after 
the  time  for  giving  notice  has  arrived.  Even  after  the  time 
provided  in  this  Act  for  giving  notice,  a  party  may  waive, 
although  by  the  omission  to  give  it  he  would  have  been 
discharged  from  liability  upon  the  instrument.  It  should 
then  appear,  however,  that  at  the  time  of  the  v^aiver  the 
party  waiving  must  have  knowledge  that  the  holder  was 
in  default,^-  although  it  makes  no  difference  that  knowing 
the  facts,  he  was  ignorant  of  the  legal  effect  of  the  hold- 
er's omission  to  give  the  notice.^^  He  may  waive  notice 
either  expressly,  in  writing  or  orally,  or  it  may  he  im- 

31.  Stewart  vs.  Eden,  2  Caines  (N.  Y.  C.  L.)  119. 

32.  Aebi  vs.  Bank  of  Evansville,  124  Wis.  73,  81,  102  N.  W. 

329. 

33.  Toole  vs.  Crafts,  193  Mass.  110. 


168  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  110 

plied  if  he  does  or  says  anything  which  may  reasonably 
be  interpreted  to  mean  a  waiver.     (See  Sec.  82.) 

If  the  person  otherwise  liable  upon  the  instrument, 
but  who  claims  discharge  by  reason  of  no  notice,  or  im- 
proi3er  or  insufficient  notice  of  non-payment,  has  said  or 
done  anything  which  ought  fairly  to  be  construed  to  mean 
a  waiver  of  notice  in  favor  of  the  person  seeking  to  en- 
force the  instrument  against  him,  a  waiver  will  be  implied 
and  he  will  be  held  to  his  obligation  to  pay  the  instru- 
ment. As  has  been  said  under  Section  82,  the  acts  or 
words  from  which  it  is  sought  to  imply  a  waiver  must  be 
interpreted  according  to  their  fair  meaning  and  the  facts 
and  circumstances  of  each  particular  case  must  be  taken 
into  account,  but  doubtful  or  equivocal  acts  or  language 
willnot  imply  a  waiver.^^" 

Who  bound  by  ''Sec.  110.     Where  the  waiver  is  em- 

waiver.  BODIED    IN    THE    INSTRUMENT    ITSELF,    IT    IS 

BINDING  UPON  ALL  PARTIES  ;  BUT  WHERE  IT  IS  WRITTEN  ABO\T) 
THE  SIGNATURE  OF  AN  INDORSER,  IT  BINDS  HIM  ONLY." 

A  negotiable  instrument  may  be  so  drawn  that  all  per- 
sons who  become  parties  are  required  to  waive  present- 
ment for  acceptance  or  payment  and  waive  notice  of  its 
dishonor.  Wlien  words  of  waiver  are  employed  in  the 
body  of  the  instrument,  making  this  a  condition  of  its 
negotiation,  all  persons  who  become  parties  to  such  an  in- 
strument are  bound  by  the  waiver  and  none  are  entitled 
to  notice.  If  it  is  not  embodied  in  the  instrument  itself 
the  waiver  may  be  written  upon  the  instrument  by  an  in- 
dorser  and  if  it  is,  it  binds  him  only.  It  does  not  affect 
the  other  parties  who  became  such  either  before  or  after 
him  and  who  do  not  themselves  waive.  (See  also  Sections 
82,  109  and  111.) 

33a.  Ross  vs.  Hurd,  71  N.  Y.  14. 

Turnbull  vs.  Maddox,  68  Md.  579. 


§111-113  NOTICE  OF  DISHONOR  169 

Waiver  of  "Sec.     111.        A    waiver    of    protest, 

protest.  whether  in  the  case  of  a  foreign  bill  of 

exchange  or  other  negotiable  instrument,  is  deemed  to 

BE  A  waiver  not  ONLY  OF  A  FORMAL  PROTEST,  BUT  ALSO  OF 
PRESENTMENT   AND   NOTICE   OF  DISHONOR." 

If  the  words  employed  in  the  waiver  are  a  waiver  of 
protest,  they  are  considered  to  be  a  waiver  of  present- 
ment and  notice  of  dishonor  as  well  as  of  formal  protest. 
Except  in  the  case  of  a  foreign  bill  of  exchange,  protest 
is  not  required  upon  dishonor  of  a  negotiable  instrument 
(Sec.  118),  but  it  may  be  made  and  if  the  waiver  is  em- 
bodied in  an  instrument  which  does  not  require  protest 
it  is,  nevertheless,  deemed  to  be  a  waiver  of  present- 
ment, demand  and  notice  of  dishonor  as  w^ell.  (Also  see 
Sees.  82,  109,  110.) 

When  notice  "Sec.  112.     Notice  of  dishonor  is  dis- 

dispensed  with,      pe^sed  with  when,  after  the  exercise  of 

REASONABLE  DILIGENCE,  IT  CANNOT  BE  GIVEN  TO  OR  DOES  NOT 
REACH   THE   PARTIES  SOUGHT  TO  BE   CHARGED." 

Notice  of  dishonor  need  not  be  given  if,  after  every 
reasonable  and  diligent  effort  to  give  the  notice  to  the 
party  entitled  thereto,  it  cannot  be  given.  It  is  also  dis- 
pensed with  if  the  party  obliged  to  give  the  notice  has  at- 
tempted with  reasonable  diligence  to  give  it  within  the 
time  and  in  the  manner  provided  in  this  Act  and  the  no- 
tice sent  does  not  reach  the  person  for  whom  it  is  in- 
tended. Reasonable  diligence  is,  as  it  has  been  defined 
under  Sec.  98,  that  degree  of  diligence  which  men  of  or- 
dinary intelligence  and  prudence  usually  exercise  when 
their  own  interests  depend  upon  obtaining  correct  infor- 
mation or  upon  prompt,  careful  action. 
Delay  in  giving  "Sec  113.  Delay  in  giving  notice  of 
notice;  how  dishonor  is  excused  when  the  delay  is 

excused.  caused  by  circumstances  beyond  the  con- 

trol OF  THE  HOLDER,  AND  NOT  IMPUTABLE  TO  HIS  DEFAULT, 
MISCONDUCT,  OR  NEGLIGENCE.  WhEN  THE  CAUSE  OF  DELAY 
CEASES  TO  OPERATE,  NOTICE  MUST  BE  GIVEN  WITH  REASONABLE 
DILIOGNCE. ' ' 


170  THE  NEGOTIABLE  INSTRUMENTS  LAW       §  114 

While  notice  must  be  given  at  the  time  and  in  the  man- 
ner required  in  Sections  103  and  104  if  it  can  be  done,  a 
delay  caused  by  circumstances  beyond  the  control  of  the 
person  whose  duty  it  is  to  give  the  notice,  and  not  caused 
by  his  fault,  his  wrongful  act,  or  due  to  his  negligence, 
will  excuse  its  omission.  The  notice  must  be  given 
promptly  and  properly,  however,  when  the  circumstances 
which  cause  the  delay  no  longer  interfere  or  prevent  it 
being  done. 

When  notice  *'Sec.  114.     Notice  of  dishoxor  is  not 

need  not  be  required  to  be  given  to  the  drawer  in 

given  to  drawer. 

either  of  the  following  cases: 

1.  Where  the  drawer  and  drawee  are  the  same 
person  ; 

'2.  Where  the  drawee  is  a  fictitious  person  or  a  per- 
son not  having  capacity  to  contract; 

3.  Where  the  drawer  is  the  person  to  whom  the  in- 
strument IS  presented  for  payment; 

4.  Where  the  drawer  has  no  right  to  expect  or  re- 
quire THAT  THE  DRAWEE  OR  ACCEPTOR  WILL  HONOR  THE  IN- 
strument ; 

5.  Where  the  drawer  has  countermanded  payment." 
The  drawer  of  a  bill,  being  a  party  secondarily  liable 

upon  the  instrument,  is  entitled  to  notice  of  its  dishonor, 
and  it  must  be  given  to  him  in  the  same  manner  as  it  is 
required  to  be  given  in  order  to  charge  an  indorser. 
However,  when  one  draws  the  bill  upon  himself  or  it  is 
drawn  upon  him  by  his  agent  or  branch  house  (Sec.  130), 
he  is  not  then  entitled  to  notice  of  its  dishonor,  since  he 
himself  causes  the  dishonor  by  his  own  failure  to  accept 
or  pay  it,  and  is  fully  aware  of  it  without  notice.  Being 
then  primarily  liable  upon  the  instrument  and  having  the 
same  liability  as  that  of  the  maker  of  a  promissory  note, 
he  is  not  affected  by  a  failure  to  give  him  notice,  (Sec. 
130.) 


§114  NOTICE  OF  DISHONOR  171 

If  he  has  drawn  the  bill  upon  a  fictitious  person,  that 
is,  as  has  already  been  explained,  one  who  does  not  exist, 
or  if  existing,  has  no  interest  in  the  instrument 
and  whose  name  is  used  for  the  purpose  of  deception 
(Sec.  9),  he  is  not  entitled  to  notice.  Neither  is  he  en- 
titled to  notice  if  he  has  drawm  the  bill  upon  a  person 
who,  from  want  of  capacity  to  contract,  cannot  be  made 
to  pay  the  instrument  if  he  does  accept  it.  This  seems  to 
be  so  even  if  in  the  last  two  cases  the  drawer  has 
issued  the  bill  without  knowledge  of  the  fictitious  charac- 
ter of  the  drawee  or  without  knowledge  of  his  want  of 
capacity  to  contract. 

If  the  drawer  is  the  person  to  whom  the  instrument  is 
presented  for  payment,  though  he  may  not  be  named  in 
it  as  the  drawee,  he  is  not  entitled  to  notice  upon  his  own 
default  in  its  acceptance  or  payment.  When  the  drawer 
of  a  bill  has  no  right  to  expect  that  the  person  upon  whom 
it  is  drawn  will  honor  it  by  acceptance  and  pajmient  he 
is  not  then  entitled  to  notice  if  the  drawee  fails  to  do 
either  and  the  bill  becomes  dishonored. 

A  drawer  who  countermands  payment,  that  is,  who 
notifies  the  acceptor  not  to  pay  the  bill,  or  gives  a  stop 
pajmient  order  and  prevents  payment  of  his  check  at 
bank,  thereby  becomes  himself  responsible  for  its  dis- 
honor and  is  not  thereafter  entitled  to  notice  of  its  non- 
payment. If  instead  of  giving  notice  of  countermand 
he  withdraws  all  of  his  funds  available  in  the  hands  of  the 
drawee  for  the  payment  of  the  bill,  mthout  any  expecta- 
tion of  replacing  them  for  the  purpose  of  paying  the  in- 
strument, this  act  is,  in  effect,  a  countermand  and  upon 
dishonor  of  the  bill  he  is  not  entitled  to  notice.^^ 


34.     Valk  vs.  Simmons,  28  Fed.  Cas.  No.  16,815,  4  Mason  113. 
Spangler  vs.  McDaniel,  3  Ind.  275. 


172  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  115 

When  notice  need      ''Sec.  115.     Notice  of  dishonor  is  not 

not  be  given  to       required    to    BE    GIVEN    TO    AN    INDORSEE    IN 

inciorser. 

either  of  the  following  cases  : 

1.  Where  the  drawee  is  a  fictitious  person  or  a  per- 
son  NOT  having  capacity  TO  CONTRACT,  AND  THE  INDORSER 

was  aware  of  the  fact  at  the  time  he  indorsed  the  in- 
strument ; 

2.  Where  the  indorser  is  the  person  to  whom  the 
instrument  is  presented  for  payment  ; 

3.  Where  the  instrument  w^as  made  or  accepted  for 
his  accommodation." 

In  every  case  except  when  dispensed  with  by  this  sec- 
tion, and  unless  it  has  been  waived,  notice  of  dishonor 
must  be  given  to  the  indorsers  upon  a  negotiable  instru- 
ment. The  first  exception  covers  that  situation  in  which 
the  indorser  upon  a  bill  of  exchange  knew  at  the  time 
he  indorsed  the  instrument  that  the  person  upon  w^hom  it 
was  drawn  was  a  fictitious  person,  or  that  it  was  drawn 
upon  one  who  had  not  the  power  to  enter  into  a  valid  and 
enforceable  contract.     (See  Sec.  9.) 

The  second  is  that  in  which  the  indorser  is  himself  the 
person  to  whom  the  instrument  is  presented  for  payment. 
Under  these  circumstances  the  indorser,  being  the  person 
who  refuses  payment,  need  not  be  given  notice  of  what  he 
already  knows. 

The  third  provides  that  when  the  instrument  is  made 
or  accepted  for  the  accommodation  of  the  indorser,  notice 
of  its  dishonor  need  not  then  be  given  to  him  and  it  is 
apparent  why  he  is  not  affected  by  lack  of  notice  of  its 
non-payment  or  non-acceptance,  for  he  is  himself  liable 
for  the  payment  of  the  debt  evidenced  by  the  instrument 
and  ought  to  have  provided  funds  to  pay  it.  Examine 
Sec.  80  of  the  Act  wherein  it  is  provided  that  presentment 
for  pa^onent  is  not  required  in  order  to  charge  an  accom- 
modated indorser  unless  he  has  no  reason  to  expect  that 
the  instrument  will  be  paid  if  presented. 


§  116  NOTICE   OF  DISHONOR  173 

It  is  recommended  that  notice  of  dishonor  be  given  to 
each  person  to  be  charged  upon  the  instrument  notwith- 
standing that  the  instiTiment  may  have  been  made  or  ac- 
cepted for  the  benefit  of  any  or  all  of  them,  even  though 
this  may  sometimes  appear  to  be  an  excess  of  precaution. 

Observe  that  by  the  provisions  of  Sub-section  1  of  this 
section,  the  indorser  upon  a  bill  of  exchange  drawn  upon 
a  fictitious  person  or  one  not  having  capacity  to  contract 
is  entitled  to  and  must  be  given  notice  of  dishonor,  unless 
he  was  aware  of  the  fictitious  character  of  the  drawee 
or  of  his  want  of  capacity  to  contract  at  the  time  he 
indorsed  the  instrument  and  that  in  this  respect  it  ditfers 
from  the  provision  of  Sub-section  2  of  Sec.  114  which  dis- 
penses with  notice  to  the  drawer  under  similar  circum- 
stances. 

Notice  of  non-  "Sec.  116.     Where  due  notice  of  dis- 

payment  where      honor  by  non-acceptance  has  been  given, 
acceptance  notice  of  a  subsequent  dishonor  by  non- 

refused.  payment  is  not  necessary,  unless  in  the 

meantime  the  instrument  has  been  accepted." 

If  an  instrument  requiring  acceptance  becomes  dis- 
honored and  notice  of  its  dishonor  by  non-acceptance  has 
been  given,  no  further  notice  need  be  given  when  the  date 
arrives  upon  which  the  instrument  ought  to  have  been 
paid  and  it  is  again  dishonored,  this  time  by  non-pay- 
ment. The  notice  of  dishonor  by  non-acceptance  is  suffi- 
cient to  charge  all  parties,  unless  the  instrument  has  been 
accepted  in  the  meantime.  If  this  should  occur  it  will 
be  necessary  to  give  notice  again  upon  dishonor  by  non- 
payment in  order  to  charge  its  parties,  even  though  they 
were  properly  notified  of  the  dishonor  by  non-acceptance. 
The  reason  for  the  rule  is,  of  course,  that  the  drawee's 
refusal  to  accept  the  bill  implies  a  refusal  to  pay  it  when 
due  and  therefore  the  bill  need  not  be  presented  for  pay- 
ment, but  if  it  is,  notice  of  non-payment  upon  its  further 


174  THE  NEGOTIABLE  INSTRUMENTS  LAW  §117,118 

dishonor  at  maturity  is  not  required  unless,  in  the  mean- 
time, the  bill  has  been  accepted. 

-gggp^  qj  ''Sec.   117.     An   omission   to  give  no- 

omission  to  give  tice  of  dishonor  by  non-acceptance  does 

notice  of  non-  not  prejudice  the  rights  of  a  holder  in 

acceptance.  j^^je    course    subsequent    to    the    omis- 

"Wisconsin.  siON "" 

A  holder  who  acquires  the  instrument  in  due  course 
after  dishonor  by  non-acceptance,  is  not  affected  by  an 
omission  to  give  notice  of  the  dishonor.  This  situation 
may  arise  when  a  bill  requiring  acceptance,  for  example, 
a  bill  payable  at  a  fixed  period  after  sight,  has  been  pre- 
sented for  acceptance  and  refused  and  it  is  afterward  ne- 
gotiated into  the  hands  of  a  holder  in  due  course  by  the 
holder  who  failed  to  give  notice  of  its  dishonor.  The  in- 
strument itself  may  not  disclose  the  fact  that  it  has  al- 
ready been  dishonored  before  its  transfer  to  one  who  be- 
came its  holder  subsequent  to  its  dishonor  by  non-accep- 
tance. The  holder  in  due  course  who  now  presents  the 
instrument  for  acceptance,  unaware  of  its  previous  dis- 
honor and  not  chargeable  with  any  duty  to  know  it,  is  not 
prejudiced  by  the  failure  of  his  transferer  or  any  former 
holder  to  give  notice  of  its  previous  dishonor.  He  may 
proceed  to  give  notice  of  its  refusal  when  dishonored 
upon  his  presentment  and  he  can  hold  all  of  the  parties 
who  are  liable  upon  the  instrument  in  the  same  manner 
and  to  the  same  extent  as  though  the  bill  had  not  previ- 
ously met  with  dishonor,  if  he  does  so  in  the  manner  and 
mthin  the  time  prescribed  in  this  subdivision. 

When  protest  ''Sec  118.     Where  any  negotiable  in- 

need  not  be  strument  has  been  dishonored  it  may  be 

made;  when  protested    for    non-acceptance    or    non- 

mnst  be  made.  payment,  as  the  case  may  be;  but  the 

PROTEST   IS   not   REQUIRED   EXCEPT   IN    THE    CASE    OF    FOREIGN 
BILLS  OF  EXCHANGE. ' ' 


§118  NOTICE   OF  DISHONOR  175 

Pi  otest  is  not  required  to  charge  the  parties  to  a  ne- 
gotiable instrument  upon  its  dishonor  except  upon  dis- 
honor of  a  foreign  bill  of  exchange,  or  before  presentment 
for  payment  to  the  acceptor  for  honor  or  referee  in  case 
of  need.  (Sec.  167.)  Section  129  defines  a  foreign  bill 
to  be  any  bill  other  than  one  "which  is,  or  on  its  face  pur- 
ports to  be,  both  drawn  and  payable  within  the  same 
State,"  and  it  also  i3rovides  that  ''unless  the  contrary 
appears  on  the  face  of  the  bill,  the  holder  may  treat  it  as 
an  inland  bill."  Inland  bills  of  exchange  are  also  defined 
in  Section  129  and  are  such  as  are,  or  which,  upon  the 
face  purport  to  be,  both  drawn  and  payable  within  the 
same  State. 

Promissory  notes  and  inland  bills  of  exchange  may 
be  protested  by  the  holder  if  he  desires  to  do  it  and  if  at- 
tempted, the  protest  must  be  made  as  required  in  Sections 
152  to  160  of  the  Act. 


176  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  119 


SUBDIVISION   VIII, 


Discharge  of  Negotiable  Instruments. 

Section  Section 

119  Instmment ;  liow  discharged.   123     Cancellation ;  unintentional ; 

120  When  person  secondarily  li-  burden  of  proof. 

able  discharged.  124     Alteration     of     instrument; 

121  Rights    of    pai-ty    who    dis-  effect  of. 

charges  instrument.  125     What  constitutes  a  material 

122  Renunciation  by  holder.  alteration. 

Under  the  provisions  of  the  two  preceding  subdivisions 
of  the  Act  which  fix  the  manner  and  time  for  presentment 
for  payment  and  of  giving  notice  of  dishonor,  the  dis- 
charge of  secondary  parties  to  a  negotiate  instrument  is 
effected  by  the  failure  of  the  liolder  to  perform  any 
of  the  important  duties  which  they  prescribe  or  by  his 
negligence  in  their  performance.  In  this  subdi\'ision, 
however,  the  Act  makes  provision  for  the  discharge  of  the 
instrument  itself  and  the  manner  in  which  a  secondary 
party  will  be  discharged  by  positive  acts  of  other  parties 
to  the  instrument.  Its  provisions  are  exclusive,  and  a 
valid  negotiable  instrument  cannot  be  discharged  in  any 
other  different  manner.^ 

Instrument:  how        "Sec.  119.     A  negotiable  instrument 
discharged.  jg  discharged: 

'^Illinois.  -(       -o 

1.     By  payment  in  due  course  by  or  on 

behalf  of  the  principal  debtor; 

2.  By  payment  in  due  course  by  the  party  accommo- 
dated,  WHERE   THE   INSTRUMENT  IS   MADE   OR  ACCEPTED    FOR 

accommodation. 

3.  By  the  intentional  cancellation  thereof  by  the 

HOLDER ; 

4.  "By  any  other  act  which  will  discharge  a  simple 
contract  for  the  payment  of  money; 

1.     Vanderford  vs.  Farmers,  etc.,  Natl.  Bank,  105  Md.  164,  168, 
68  A.  47,  10  L.  R.  A.  (N.  S.)  99. 


§  119  DISCHARGE  OF  NEG.  INSTRUMENTS  177 

5.  When  the  principal  debtor  becomes  the  holder 
OF  the  instrument  at  or  after  maturity  in   his  own 

RIGHT. ' ' 

The  complete  discharge  of  the  instrument  itself  is 
effected  when  the  obligation  of  the  parties  primarily 
liable  upon  it  is  performed  or  extinguished.  This  oc- 
curs as  a  matter  of  course  when  the  principal  debtor 
pays  the  instrument  in  full  in  lawful  funds  or  some  one 
so  pays  it  for  him  in  the  manner  described  in  Section  88, 
or  when  it  is  paid  in  that  manner  by  the  party,  or  one  of 
several  parties,  for  w^hose  accommodation  it  is  made  or 
accepted,  if  it  is  an  accommodation  instrument.  If  any- 
thing other  than  money  is  offered  and  received  as,  for 
example,  a  renewal  note,  check,  draft,  property,  or 
goods,  it  must  appear  that  when  given  and  received,  the 
thing  offered  was  intended  to  be  in  extinguishment  of 
the  note  or  other  instrument  which  it  was  given  to  pay.^ 
Discharge  also  occurs  when  any  holder  who  holds  in  his 
own  right,  cancels  the  instrument  with  the  intention  of 
discharging  it  or  when  one  who  holds  it  as  the  agent  of 
another  intentionally  cancels  it  by  authority  of  his  prin- 
cipal. The  motive  which  prompts  its  cancellation  is  im- 
material, and  the  instrument  will  be  considered  to  be 
cancelled  if  it  is  intentionally  marked  so  or  is  mutilated 
in  such  a  manner  as  will  indicate  an  intention  to  cancel 
it,^  provided  there  is  no  fraud,  mistake,  or  duress  in  the 
procurement  of  its  cancellation.^  An  unintentional  can- 
cellation is  not  operative,  however,  as  you  will  observe 
from  Section  123. 

2.  romstock  vs.  Buckley,  141  Wise.  228. 
Tvler  vs.  Hyde,  SO  111.  A.  123. 

In  re  Utica  Natl.  Br.  Co.,  154  N.  Y.  268. 

3.  Montgomeiy  vs.  Schwald,  177  Mo.  App.  75. 

4.  Kester  vs.  Kecter,  38  Ore?:on,  10,  62  P.  635. 
Liesemcr  vs.  Bunr.  106  Mich.  124,  63  N.  W.  999. 
Findley  vs.  Cowles,  93  Iowa,  389.  61  N.  W.  998. 


178  THE  NEGOTIABLE  INSTRUMENTS  hX\\       §  120 

The  discharge  in  the  manner  mentioned  in  the  fourth 
sub-section  of  tliis  section  embraces  every  voluntary- 
act  which  would  relieve  the  person  obliged  to  pay  money 
under  the  terms  of  a  simple  contract  from  the  duty  to 
do  so.  The  act  which  is  relied  upon  to  discharge  the  in- 
strument under  this  sub-section  must,  however,  be  one 
Avhich  is  engaged  in  and  performed  between  the  right- 
ful holder  and  the  party  primarily  liable  upon  the  instru- 
ment Avhose  duty  it  is  to  pay  it,  and  it  must  be  of  such  a 
nature  that  it  will  relieve  him  of  his  obligation  to  pay 
the  instrument  to  the  holder.^ 

The  instrument  is  also  discharged  when  the  person 
who  by  its  terms  is  required  to  pay  it,  and  who  appears, 
therefore,  to  be  the  principal  debtor,  or  when  one  for 
whose  accommodation  the  instrument  was  made  and  who 
is,  therefore,  in  fact  the  principal  debtor,  becomes  its 
owner  at  or  after  its  maturity.  To  have  this  effect  he 
must  have  acquired  it  in  his  own  right  as  its  absolute 
owner,  free  from  the  rights  of  all  other  persons  and  not  in 
any  representative  capacity.^  If  he  becomes  the  owner  of 
the  instrument  before  maturity  he  may  then  re-negotiate 
it.    It  is  so  provided  in  Section  50. 

*'SeC.    120.       A   PERSON    SECONDARILY   LIA- 

When  person        ^^^  ^^  ^^^  instrument  is  discharged  : 

secondarily  liable       -,       y^ 

on,  discharged.        .  ^-     ^^^  ^^^  ^^'^  which  discharges  the 

"Illinois.  INSTRUMENT ; 

^'Wisconsin.  2.     By  the   intentional  cancellation 

l^aryland,  ^p  jjjg  signature  by  the  holder; 

^'Missouri  ^-       "^^'    '^^^    discharge     of    a    prior 

party  f 

4.  By  a  valid  tender  of  payment  made  by  a  prior 
party  ;^ 

5.  In  re  Metallic  Specialty  Co.,  210  Fed.  663. 
Crawford  vs.  Moore,  28  Fed.  824. 

6.  Schwartzman  vs.  Post,  94  App.  Div.  (N.  Y.)  474,  477. 
Korkemas  vs.  Macksoud,  131  App.  Div.  (X.  Y.)  728. 


§  120  DISCHARGE  OF  NEG.  INSTRUMENTS  179 

5.  By  A  RELEASE  OF  THE  PRINCIPAL  DEBTOR,  UNLESS  THE 
holder's  right  of  RECOURSE  AGAINST  THE  PARTY  SECOND- 
arily liable  is  expressly  reserved;* 

6.  By  any"  agreement*  binding  upon  the  holder  to 
extend    the    time    of    payment,    or    to    postpone    the 

holder's  right  to  ENFORCE  THE  INSTRUMENT,''  UNLESS 
MADE  WITH  THE  ASSENT  OF  THE  PARTY  SECONDARILY  LIABLE, 
OR^  UNLESS"  THE  RIGHT  OF  RECOURSE  AGAINST  SUCH  PARTY  IS 
EXPRESSLY  RESERVED. '  '* 

Parties  other  than  those  primarily  liable  on  the  in- 
strument are  discharged  in  the  manner  provided  in  this 
section  and,  as  has  already  been  stated,  by  the  failure 
of  the  holder  to  make  proper  presentment  and  to  give 
due  notice  of  dishonor  in  strict  accordance  with  the  pro- 
visions of  subdivisions  6  and  7  of  this  Title  of  the  Act 
and  the  provisions  to  the  same  effect  in  Title  2  relating 
particularly  to  bills  of  exchange. 

Any  act  whereby  the  instrument  itself  is  discharged 
as  provided  in  Section  119,  discharges  the  secondary 
parties,  as  a  matter  of  course.  A  secondary  party  is 
also  discharged  when  his  signature  is  intentionally  can- 
celled by  the  holder.  The  valid  discharge  by  the  holder 
of  a  prior  party,  w^iether  primarily  or  secondarily  liable 
upon  the  instrument,  Avill  discharge  all  subsequent  sec- 
ondary parties.  This,  however,  does  not  contemplate 
relief  from  his  obligation  upon  the  instrument  obtained 
by  a  party  in  any  other  manner  than  by  the  positive  act  of 
another  subsequent  party  to  w^iom  he  is  liable.  Each  sec- 
ondary party  to  the  instrument  engages  separately  with 
each  subsequent  holder  that  he  will  pay  the  instrument 
if  the  primary  party  does  not.  His  engagement  is  trans- 
mitted by  the  negotiation  of  the  instrument  to  subse- 
quent holders  and  his  liability  extends  from  one  to  an- 
other as  the  instrument  is  acquired  by  them.  It  may 
happen  that  this  liability  to  the  holder  at  maturity  will 
be  discharged  by  the  latter 's  omission  to  give  him  notice 


180  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  120 

of  the  dishonor  of  the  instrument  but  if  he  is  duly  noti- 
fied by  an  intervening  party  to  whom  his  liability  has  been 
transmitted,  he  continues  to  be  liable  to  that  intermedi- 
ate party  J  You  will  see,  therefore,  that  although  the 
liability  of  a  secondary  party  may  be  completely  dis- 
charged as  to  one  or  some  other  secondary  parties,  it  is 
not  necessarily  discharged  as  to  all.  There  are  appro- 
priate other  sections  of  the  Act  which  govern  tlie  man-. 
ner  by  which  secondary  parties  are  discharged  under 
particular  circumstances,  as  by  failure  to  make  proper 
presentment  and  give  notice  of  dishonor,  and  these  will 
be  found  fully  indexed. 

A  secondary  jjarty  is  also  discharged  when  any  prior 
party  offers  to  pay  the  instrument  and  makes  a  good 
tender  of  payment  which  is  refused  by  the -holder.  A 
valid  tender  of  payment,  therefore,  operates  in  favor 
of  all  parties  subsequent  to  the  one  making  it,  and  if  it 
is  refused,  all  such  parties  are  discharged.  Such  a  tender 
is  made,  not  by  the  mere  expression  of  a  willingness  to 
pay  the  instrument,  but  by  the  actual  offer  to  do  so  ac- 
companied by  the  exact  amount  of  money  due  upon  it.^ 

When  a  release  is  granted  by  the  holder  to  the  prin- 
cipal debtor,  that  is,  the  person  whose  primary  obligation 
the  instrument  is,  secondary  parties  will  be  discharged 
unless  the  holder  reserves  his  right  of  recourse  against 
them.  If  he  expressly  reserve  his  right  of  recourse 
against  them,  however,  they  will  not  be  discharged.  Un- 
der these  circumstances  the  rights  of  parties  secondar- 
ily liable  to  recover  against  the  principal  debtor  are, 
notwithstanding  his  release  by  the  holder,  impliedly  re- 
served to  them,  and  they  may  proceed  against  him  upon 

7.  West  River  Bank  vs.  Taylor,  34  N.  Y.  128,  131. 

8.  Holmes  vs.  Holmes,  12  Barbour  (N.  Y.)  137. 


§  121  DISCHARGE  OF  NEG.  INSTRUMENTS  181 

taking  up  the  instrument.^  Therefore,  whenever  the 
holder  agrees  to  release  the  principal  debtor  from  his 
obligation  upon  the  instrument,  he  must  indorse  upon 
it  a  declaration  or  state  in  the  release  that  he  reserves 
his  right  of  recovery  against  the  parties  secondarily 
liable  to  him,  if  he  intends  to  look  to  them  for  payment. 

Secondary  parties  will  also  be  discharged  if  the  holder 
enters  into  enforceable  agreement  with  any  party  by 
which  the  time  of  payment  of  the  instrument  is  ex- 
tended, unless  the  agreement  is  made  with  their  consent 
or  unless,  at  the  time  of  making  it,  the  holder  expressly 
reserves  his  right  to  proceed  against  them  in  the  mean- 
time. If  the  secondary  parties  are  dissatisfied,  their 
remedy  is  to  take  up  the  instrument  and  proceed  upon 
it  against  the  principal  debtor  and  prior  parties.^^ 

It  must  be  understood  that  this  express  reservation  of 
the  right  of  recourse  against  secondary  parties  does  not 
dispense  with  the  necessity  of  presentment,  demand, 
and  notice  of  dishonor,  and  of  protest  in  the  case  of  a 
foreign  bill  of  exchange,  for  if  these  are  omitted  when, 
at  its  maturity,  the  instrument  is  not  paid,  the  second- 
ary parties  cease  to  be  liable  and  the  holder  will  have 
no  right  of  recourse  against  them.  (See  subdivisions 
6  and  7.) 

Rights  of  party  "Sec.  121.  Wheee  the  instrument  is 
who  discharges  p^iD  by  a  party  secondarily  liable  there- 
instniment.  ^^^  ^^  jg  ^^^  discharged;  but  the  party 

so  paying  it  is  remitted  to  his  former  rights  as  regards 

ALL  PRIOR  parties,  AND  HE  MAY  STRIKE  OUT  HIS  OWN  AND 
ALL  SUBSEQUENT  INDORSEMENTS,  AND  AGAIN  NEGOTIATE  THE 
INSTRUMENT,  EXCEPT  : 


9.  Sec.  Natl.  Bank  vs.  Graham,  246  Pa.  St.  256. 
Torabeckbe  Bank  vs.  Stratton,  7  Wend.  (N.  Y.)  429. 
Stewart  vs.  Eden,  2  Cai.  121. 

10.  Natl.  Park  Bank  vs.  Koehler,  204  N.  Y.  174. 
Rilbe  vs.  Austin,  155  App.  Div.  (N.  Y.)  207. 


182  THE  NEGOTIABLE  INSTRUMENTS  LAW       §  121 

1.  Where  it  is  payable  to  the  order  of  a  third  pek- 
son,  and  has  been  paid  by  the  drawer;  and 

2.  Where  it  was  made  or  accepted  for  accommoda- 
tion AND  HAS  BEEN  PAID  BY  THE  PARTY  ACCOMMODATED." 

By  any  of  the  acts  set  forth  in  Section  119,  the  in- 
strument itself  becomes  discharged  and  it  cannot  again 
be  negotiated  upon  being  discharged  in  the  manner  de- 
scribed in  that  section  at  or  after  its  maturity.  But 
when  an  instrument  is  negotiated  back  to  a  prior  party, 
even  to  the  principal  debtor,  before  maturity,  he  may 
again  reissue  and  negotiate  it.  (Sec.  50.)  If  he  does,  no 
party  can  be  held  to  his  signature  placed  upon  the  in- 
strument prior  to  its  reissue. 

And  now,  you  will  observe,  it  is  provided  in  this  sec- 
tion that  when  a  party  secondarily  liable  takes  up  the 
instrument  by  payment  to  any  holder,  either  before  or 
after  maturity,  it  is  not  discharged  as  to  any  party  upon 
it  except  the  one  to  whom  the  payment  is  made  and 
those  parties  subsequent  to  the  indorser  who  pays  it,  to 
whom  he  would  himself  ])e  liable.^ ^  The  party  paying  is 
again  in  the  position  which  he  occupied  when  he  first 
negotiated  the  instrument  and  he  may  strike  out  his 
own  signature  and  the  signatures  of  all  who  became  par- 
ties after  him,  and  negotiate  it  again  as  by  a  new  in- 
dorsement. The  instrument  remains  in  effect  as  before 
payment  by  him  (Sec.  50)  against  all  parties  who  placed 
their  signatures  upon  it  prior  that  of  the  party  who  pays 
it.  This  cannot  be  done,  however,  if  the  instrument  is 
a  bill  of  exchange  payable  to  a  person  other  than  the 
drawer  or  the  drawee  and  the  drawer  himself  pays  it, 
or  if  the  instrument  is  paid  by  the  party  for  whose  ac- 
commodation it  was  made.  When  such  a  bill  is  in  the 
hands  of  the  drawer  that  fact  is,  of  itself,  notice  that  it 


11.     Quimby  vs.  Vanuiin,  190  Mass.  211,  214. 


§  122  DISCHARGE  OF  NEG.  INSTRUMENTS  183 

has  run  its  course  and  is  sufficient  to  cause  any  ordinar- 
ily prudent  person  to  make  inquiry  to  learn  whether  it 
has  not  already  been  paid.^-  And  when  the  bill  is  paid 
by  the  accommodated  indorser  it  is  extinguished.^^  For 
the  effect  of  striking  out  indorsements  and  what  signa- 
tures may  be  necessary  to  show  holder's  title,  see  Sec. 
48. 

Renunciation  "by  *'Sec.  122.  The  holder  may  expressly 
holder.  renounce  his  rights  against  any  party 

TO    THE    INSTRUMENT,    BEFORE,    AT    OR    AFTER    ITS    MATURITY. 

An  absolute  and  unconditional  renunciation  of  his 
rights  against  the  principal  debtor  made  at  or  after 
the  maturity  of  the  instrument  discharges  the  instru- 
MENT.    But  a  renunciation  does  not  affect  the  rights 

OF  A  holder  in  due  COURSE  WITHOUT  NOTICE.  A  RENUN- 
CIATION MUST  BE  IN  WRITING,  UNLESS  THE  INSTRUMENT  IS 
DELIVERED  UP  TO   THE   PERSON   PRIMARILY   LIABLE   THEREON." 

The  holder  may  at  any  time  renounce,  that  is,  volun- 
tarily give  up,  release,  or  abandon  all  of  his  rights  under 
the  instrument  including  his  right  to  payment,  without 
transferring  them  to  someone  else.^-^  He  usually  does 
this  without  consideration  but  a  renunciation  may  be 
made  in  compromise,  or  in  exchange  for  something  else 
which  the  holder  accepts  in  place  of  the  instrument 
and  the  section  is  applicable  where  the  renunciation  is 
executed  for  a  consideration.^^'  The  renunciation  must 
be  in  writing  unless  the  instrument  is  delivered  up  to 
the  person  obliged  to  pay  it.  It  must  be  absolute  and 
unconditional.^^  If  the  party  intending  to  renounce  his 
rights  delivers  up  the  instrument  before,  at  or  after  its 
maturity  to  the  person  primarily  liable  upon  it  w^ith  the 
intention  of  renouncing  his  interest  in  it  and  his  rights 

12.  First  Natl.  Bank  vs.  Harris,  7  Wash.  139. 

13.  Qiumby  vs.  Varnum,  190  Mass.  211. 

14.  Pitt  vs.  Little,  58  Wash.  355,  108  P.  941. 

15.  Whiteomb  vs.  Natl.  Exchange  Bank,  123  Md.  612. 

16.  Leask  vs.  Dew,  102  App.  Div.  (N.  Y.)  529. 


184  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  123 

to  it,  the  instrnment  is  completely  discharged;  he  can- 
not afterward  recover  from  any  party  to  it.  But  if  the 
renunciation  is  made  before  maturity,  in  writing,  and  the 
instrument  is  retained  by  the  person  giving  it  and  he 
afterwards  negotiates  the  instrument  to  a  holder  in  due 
course,  or  if  he  has  previously  done  so,  this  holder  in 
due  course  is  not  bound  by  the  renunciation  and  can  en- 
force the  instrument,  unless  he  had  notice  of  it.  And  if 
one  to  whom  the  instrument  is  payable  but  who  no  longer 
holds  it,  executes  a  renunciation,  this  will  not  affect  a 
holder  of  the  instrument  who  is  a  holder  in  due  course 
without  notice.  It  is  obvious  then,  that  if  the  person 
primarily  liable  upon  an  instrument  desires  a  renun- 
ciation he  must  obtain  it  from  the  holder  and  if  the  in- 
strument is  not  delivered  to  him,  its  absence  must  be 
satisfactorily  accounted  for  or  the  renunciation  may  not 
prove  to  be  an  effective  discharge.  When  made  in  favor 
of  the  principal  debtor  the  renunciation  discharges  the 
whole  instrument,  but  if  made  in  favor  of  a  secondary 
party  it  discharges  only  that  party  in  whose  favor  it  is 
made  and  those  parties  subsequent  to  him  who  w^ould 
have  a  right  of  recourse  against  him  if  called  upon  to 
pay  the  instrument.     (Sec.  120-3.) 

Cancellation;  "Sec.  123.     A  cancellation  made  un- 

unintentional ;  intentionally,  oe  under  a  mistake,  or 
burden  of  uroof. 

^  without  authority  of  the  holder,  is  in- 

operative; BUT  where  an  instrument  OR  ANY'  SIGNATURE 
THEREON  APPEARS  TO  HAVE  BEEN  CANCELLED  THE  BURDEN  OF 
PROOF  LIES  ON  THE  PARTY  WHO  ALLEGES  THAT  THE  CANCELLA- 
TION WAS  MADE  UNINTENTIONALLY,  OR  UNDER  A  MISTAKE  OR 
WITHOUT    AUTHORITY. ' ' 

If  the  cancellation  of  tlie  instrument,  or  of  any  sig- 
nature upon  it  is  made  by  mistake  or  without  authority 
of  the  holder,  it  is  not  operative.  It  does  not  cancel  the 
instrument  or  the  signature  of  the  party  and  when  any 
signature  upon  the  instrument  or  the  instrument  itself 


§  124  DISCHARGE  OF  NEG.  INSTRUMENTS  185 

appears  to  have  been  cancelled,  the  person  seeking  to 
enforce  the  instrument  may  show  that  the  cancellation 
was  made  unintentionally  or  without  authority.  But 
he  must  prove  this  to  be  so  by  evidence  sufficient  to 
overcome  any  evidence  offered  by  the  opposing  party  in 
support  of  his  claim  that  the  cancellation  was  made  in- 
tentionally. 


"Sec.   124.     "Where   a   negotiable   ix- 
strumext  is  ''materially  altered*  with- 


Alteration  of 
instrument ; 

effect  of.  OUT     THE     ASSENT     OF     ALL     PARTIES     LIABLE 

"Illinois.  THEREON,   IT   IS  AVOIDED,   EXCEPT  AS   AGAINST 

^So.  Dakota.  ^  party  who  has  himself  made,  author- 

cWisconsin.  ized,  or  assented"  to  the  alteratiox,  axd 

subsequext  ixdorsers. 

But  when  an  instrument  has  been"  materially  al- 
tered'' axd  is  in  the  hands  of  a  holder  in  due  course, 
not  a  party  to  the  alteration,  he  may  enforce  payment 
thereof  according  to  its  original  tenor." 

The  changes  and  insertions  which  may  be  made  in 
the  instrument  by  the  holder  without  the  consent  of  par- 
ties are  to  be  found  in  Sections  13,  14  and  48.  Certain 
material  alterations  may  not  be  made,  however,  after 
the  instrument  has  been  issued,  without  the  consent  of 
all  parties  liable  upon  it.  What  these  are  will  appear 
from  the  next  section.  If  any  material  alteration  which 
is  prohibited  by  that  section  is  made  without  the  con- 
sent of  all  parties  the  instrument  will  be  avoided  as 
against  all  except  those  who  made,  authorized  or  con- 
sented to  the  alteration  and  except  those  indorsers  who, 
without  notice,  indorse  the  instrument  after  the  ma- 
terial alteration  had  already  been  made.  When  any  in- 
strument Avhich  has  been  materially  altered  w^ithout  the 
assent  of  parties  is  in  the  hands  of  a  holder  in  due  course, 
meaning  one  who  took  it  with  the  qualifications  pre- 
scribed by  Sec.  52,  and  without  notice  of  the 
alteration,  and  he  is  not  a  party  to  the  unauthorized 


186  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  124 

material  alteration,  lie  may  enforce  it  according  to  its 
original  tenor,  meaning  that  lie  may  recover  upon  the 
instrument  in  the  original  amount  and  according  to  its 
original  terms  against  all  parties,  or  he  may  enforce  it 
according  to  its  altered  effect  against  the  parties  who 
made,  authorized  or  consented  to  the  alteration.  In  this 
respect,  this  section  effects  a  change  in  the  law.  Hereto- 
fore it  has  been  almost  universally  held  that  an  instru- 
ment which  has  been  materially  altered  is  thereby  com- 
pletely avoided  and  is  unenforceable  either  in  its  altered 
effect  or  according  to  its  original  tenor. 

Upon  the  general  subject  of  alteration  it  may  be  well 
to  explain  that  in  determining  its  effect  upon  the 
instrument  a  controlling  regard  will  be  had  to  the  time 
when  the  alteration  was  made,  and  whether  or  not  the 
contract  in  the  form  in  which  it  is  sought  to  be  enforced 
is  the  identical  contract  upon  which  the  minds  of  the 
parties  met.^'^  In  order  to  avoid  an  instrument  upon 
the  technical  ground  of  material  alteration,  it  is  im- 
portant that  the  instrument  must  have  had  at 
the  time  it  was  altered  an  actual,  legal  existence 
as  a  negotiable  instrument.^^  The  instrument  obtains 
this  effect  when  there  has  been  a  valid  initial  delivery 
and  therefore,  except  under  special  circumstances,  any 
alteration  made  before  the  inception  of  the  instrument 
would  not  avoid  it.  Even  if  made  after  the  instrument 
has  been  negotiated  a  change  in  its  language  or  form 
which  does  not  disturb  its  legal  effect  or  in  any  way  im- 

17.  Wicker  vs.  Jones,  159  N.  C.  102,  107,  74  S.  E.  801. 
Levi  vs.  Arons,  81  Misc.  (N.  Y.)  165. 

18.  Builders  Lime  &  Cement  Co.  vs.  Weimer  (Iowa),  151  N.  W.  100. 
Bingham  vs.  Reddy,  3  Fed.  Cas.  No.  1414,  at  p.  404. 
Matson  vs.  Jarvis  (Tex.  Civ.  App.),  133  S.  W.  941,  943. 
Tliaip  vs.  Jameson,  154  la.  77.  134  N.  W.  583,  39  L.  R.  A. 

(N.  S.)  100. 
Zander  vs.  Com.,  102  Pa.  434,  439. 


§  125  DISCHARGE  OF  NEG.  INSTRUMENTS  187 

pair  the  obligations  of  the  parties  or  their  rights,  or 
change  their  identity  or  the  identity  of  the  instrument, 
will  not  avoid  it  or  discharge  its  parties. ^^ 

Since  the  next  section  defines  what  are  material  al- 
terations further  observations  upon  their  effect  upon 
the  instrument  will  be  made  there. 

What  constitutes  ''Sec.  125.  Any  alteration  which 
a  material  changes  : 

alteration.  1^     The  date; 

2.  The  sum  payable,  either  for  principal  or  interest; 

3.  The  time  or  place  of  payment; 

4.  The  number  or  the  relations  of  the  parties; 

5.  The  medium  or  currency  in  which  payment  is  to 
BE  made;  or  which  adds  a  place  of  payment  where  no 

PLACE  OF  payment  IS  SPECIFIED,  OR  ANY  OTHER  CHANGE  OR 
addition  WHICH  ALTERS  THE  EFFECT  OF  THE  INSTRUMENT 
IN  ANY  RESPECT,   IS   A   MATERIAL  ALTERATION." 

Any  of  the  material  alterations  enumerated  in  this 
section,  if  made  without  authority  of  all  parties  to  the 
instrument,  even  though  they  may  appear  to  be  to  the 
advantage  of  the  person  who  is  to  pay  the  instrument, 
will  avoid  it  as  to  any  party  whose  authority  to  make 
them  has  not  first  been  obtained  or  who  does  not  give 
assent  to  them  after  they  have  been  made. 

The  sum  payable  may  not  be  changed,  not  even  less- 
ened f^  the  rate  of  interest  increased  or  diminished  f^ 
or  the  instrument  made  payable  with  interest  when  none 
was  contemplated.^^ 

19.  Pitt  vs.  Little,  58  Wash.  355,  108  P.  941. 
Crowe  vs.  Beem,  36  Ind.  A.  207,  75  N.  E.  302. 
Sanford  vs.  Cairo  Citv  Nat.  Bank,  15  Ky.  L.  607. 
Kronskup  vs.  Sliontz.  51  Wise,  204,  8  N.  W.  241,  37  Am.  R. 

817. 

20.  Hewins  vs.  Car^ill,  67  Me.  554. 
Batchelder  vs.  White,  80  Va.  103. 

21.  N.  Y.  Life  Ins.   Co.  vs.  Martindale,  75  Kan.  142,  146,  88  P. 

559,  121  Am.  S.  R.  362,  21  L.  R.  A.   (N.  S.)  1045,  12  Ann. 
Cas.  677. 

22.  Broadway  Nat.  Bank  vs.  Hefferman,  220  Mass.  247. 
Columbia  Dist.  Co.  vs.  Rech,  151  App.  Div.  (N.  Y.)  128. 
Comm'l  Bank  vs.  Maguire,  89  Minn.  394,  95  N.  W.  212. 


188  THE  NEGOTIABLE  INSTRUMENTS  LAW       §  125 

A  place  of  payment  ma^^  not  be  inserted  without  con- 
sent when  the  instrument  is  payable  generally,^^  but  if 
the  place  designated  is  a  bank  which  is  afterward 
succeeded  by  another  that  continues  to  occupy  the 
premises  formerly  occupied  by  the  bank  designated,  the 
substitution  of  the  name  of  the  successor  bank  would 
not  be  a  material  alteration.^* 

The  time  at  which  the  instrument  is  payable  may  not 
be  changed^^  and  the  number  of  its  parties  or  their  re- 
lation to  each  other  may  not  be  altered  Avithout  the  con- 
sent of  all.    If,  after  a  promissory  note  is  executed  and 
delivered,  one  should  add  his  name  as  maker,  this,  it 
has  been  held  in  some  jurisdictions,  will  avoid  the  in- 
strument as  to  those  parties  who  do  not  consent  to  the 
addition  of  his  signature.     Such  an  alteration  would  de- 
stroy the  identity  of  the  instrument  and  has  very  fre- 
quently been  held,  before  the  passage  of  the  Act,  to  be 
a  material  alteration  both  on  this  ground  and  because, 
in  the  case  of  a  joint  instrument,  it  confuses  the  evi- 
dence of  the  debt  and  affects  the  right  of  contribution 
between  the  parties.^*^     Greater  difficulty  has  been  en- 
countered, however,  when  a  genuine  name  has  been  in- 
tentionally added  as  maker  to  an  instrument  upon  Avhich 
the  liabilitv  of  the  makers  is  several,  and  the  new  name 


23.  Wilkes-Barre  1st  Nat.  Bank  vs.  Barnum,  160  Fed.  245. 
Pelton  vs.  San  Jacinto  Lbr.  Co.,  113  Cal.  21,  45  P.  12. 

24.  Melton  vs.  Pensacola  Bank,  190  Fed.  126,  111  C.  C.  A.  166. 

25.  Pensacola  State  Bank  vs.  Melton,  210  Fed.  57. 

26.  Baker  vs.  Lehman,  etc.,  Co.  (Ala.),  65  S.  321. 
Brown  vs.  Johnson,  127  Ala.  292,  28  S.  579. 
Soaps  vs.  Eichbore;,  42  111.  A.  375. 

Houck  vs.  Graham,  106  Ind.  195,  6  N.  E.  594. 

Browning  vs.  Gosnell,  91  la.  448. 

Handsaker  vs.  Pedersen,  71  Wash.  218. 

Wallace  vs.  Jewell,  21  Ohio  St.  163  (holding  also  that  if  a 
new  party  signs  on  the  face  of  note,  by  mistake,  this  is  not 
a  material  alteration,  and  that  his  true  relation  to  the 
instrument  may  be  shown). 


§  125  DISCHARGE  OF  NEG.  INSTRUMENTS  189 

has  been  added  as  additional  security  after  the  instru- 
ment has  been  issued  and  negotiated. ^'^ 

But  sub-section  4  of  this  section  seems  to  have  changed 
the  law  on  this  subject  and  one  can  now  reach  no  other 
conclusion  than  that  the  addition  of  another  name  to  the 
instrument  as  maker  is  a  material  alteration,  for  this 
sub-section  expressly  provides  that  any  alteration  which 
changes  the  number  or  the  relation  of  the  parties  to  the 
instrument  is  a  material  alteration,  and  will  avoid  the 
instrument  and  I  think  that  the  decisions  abundantly 
support  it,  although  there  is  great  conflict  of  authority 
upon  this  question.  It  has  even  been  held  that  if  the 
additional  name  is  a  forgery,  the  instrument  is 
avoided. ^^ 

If  the  instrument  is  payable  upon  named  conditions 
these  may  not  be  changed  without  consent.  The  kind  of 
money  in  which  it  is  payable  may  not  be  changed  nor 
may  any  other  alteration  be  made,  without  consent, 
which  would  change  the  effect  of  the  instrument  in  any 
material  respect. 

Under  certain  circumstances,  as,  for  example,  where 
a  note  has  been  taken  in  extinguishment  of  a  debt,  one 
who  alters  it  in  a  material  respect  and  thereby  avoids  it, 
can  have  no  recovery  on  the  original  debt,  for  that  was 
merged  in  the  note.^''  This  is  true  even  if  there  is  an  en- 
tire absence  of  fraudulent  intent  in  making  the  altera- 
tion, unless,  perhaps,  the  alteration  was  made  by  a 
stranger.  Where  one  fraudulently  alters  the  instrument 
he  cannot,  of  course,  recover  upon  either  the  instrument 
or  the  consideration.^^ 

27.  McCauu-hey  vs.  Smith,  27  N.  Y.  39. 
Brownell  vs.  Winnie,  29  N.  Y.  400. 
Mersman  vs.  Weracs,  112  U.  S.  139,  141. 

28.  Beem  vs.  Farrell  (Iowa),  108  N.  W.  1044. 

29.  Weston  vs.  Wilev,  78  Ind.  54. 

30.  Columbia  Dist.  Co.  vs.  Rech,  151  App.  Div.  (N.  Y.)  128. 
Harvesting  Mach.  Co.  vs.  Blair,  146  Mo.  App.  374,  386. 


190  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  125 

The  literal  interpretation  of  Sections  124  and  125 
must  now,  however,  include  alterations  made  by  stran- 
gers as  well  as  by  parties  to  the  instrument.  But  it  had 
long  been  held  to  be  the  law  in  this  country,  prior  to 
the  enactment  of  this  section  and  Section  124  of  this  Act, 
that  a  material  alteration  made  by  a  stranger  to  the  in- 
strument, that  is,  by  any  person  not  having  a  beneficial 
interest  in  it,  was  a  mere  spoliation  of  the  instrument 
and  that  the  instrument  could  be  enforced  by  the  holder 
in  its  original  form.^^  As  to  a  holder  in  due  course  this 
is  still  the  law,  since  by  Section  124  a  holder  in  due 
course,  not  a  party  to  the  alteration,  may  enforce  the  in- 
strmnent  according  to  its  original  tenor,  no  matter  by 
whom  the  alteration  was  made.  As  to  the  original  par- 
ties themselves,  however,  a  material  alteration  avoids 
the  instrument  even  though  it  was  made  by  a  stranger. 
This  interpretation  will  probably  find  opposition  and 
doubtless  the  courts  will  reluctantly  substitute  the 
English  rule  for  that  so  universally  recognized  in  our 
o\^^l  decisions.  These,  however,  upon  examination,  will  be 
found  to  be  based  upon  previous  statutes,  differing  from 
this  section,  which  declare  that  a  material  alteration 
made  by  a  party  or  by  some  one  acting  with  his  knowl- 
edge, consent,  or  approval,  will  avoid  the  instniment. 
It  appears  to  have  been  clearly  intended  to  adopt  the  rule 
that  alteration  by  a  stranger  will  avoid  the  instrument 
and  a  material  alteration  by  a  stranger  cannot  now,  in 
States  where  this  Act  is  in  effect,  be  regarded,  between 
original  parties  to  an  instrument,  as  a  mere  spoliation. 
Unless  this  section  is  changed,  its  language  will  not  jus- 
tify any  other  interpretation.  If  the  instrument  has  not 
been  altered  with  fraudulent  intent,  there  may  always  be 
a  recovery  on  the  original  consideration.^^ 

31.  Kingan  &  Co.  vs.  Silvers,  13  Ind.  A.  80. 

32.  Harvesting  Mach.  Co.  vs.  Blair,  146  Mo.  App.  374,  386. 


§  125  DISCHARGE  OF  NEG.  INSTRUMENTS  191 

Whenever  the  matter  of  intent  in  making  a  material  al- 
teration enters  into  its  consideration  at  all,  fraudulent  in- 
tent will  be  presumed  if  the  material  alteration  is  bene- 
ficial to  the  person  making  it.^^  Alteration  by  cutting  off 
a  part  of  the  paper  on  which  the  instrument  is  w^ritten, 
in  such  a  manner  as  to  change  its  etfect,  is  material  and 
will  avoid  it.^^ 

The  alterations  contemplated  in  this  and  the  preceding 
section  are  physical  alterations  of  the  instrument  itself, 
and  these  sections  are  not  to  be  aijplied  to  determine  the 
effect  of  any  agreement  or  understanding  between  or 
among  the  parties  to  a  negotiable  instrument  by  which 
its  terms,  or  by  which  their  liability  upon  it  is  to  be 
changed.  Do  not  alter  the  instrument  in  any  respect 
without  first  obtaining  the  consent  of  all  parties,  except 
in  the  manner  expressly  permitted  by  Sections  13  and  14. 

If  payment  has  been  made  on  an  altered  instrument 
under  a  mistake  of  fact,  in  ignorance  of  the  alteration. by 
a  party  who  had  been  discharged  by  the  alteration,  he 
may  recover  it  if  no  negligence  is  imputable  to  him.^^ 
But  if  the  payment  is  made  under  a  mistaken  knowledge 
or  impression  of  the  legal  effect  of  the  alteration  upon 
the  rights  of  the  party  paying,  he  cannot  then  recover  it, 
this  being  the  rule  applicable  to  any  payment  made  under 
a  mist-ake  of  law.^*' 

33.  Dove  vs.  Fansler,  132  Mo.  App.  669,  672,  112  S.  W.  1009. 

34.  Wicker  vs.  Jones,  159  N.  C.  102,  109. 

35.  Sheridan  vs.  Carpenter,  61  Me.  83. 

36.  Tabor  vs.  New  Bedford,  177  Mass.  197. 

Flvnn  vs.  Howard,  118  N.  Y.  19,  22  N.  E.  1109. 


192  THE  NEGOTIABLE  INSTRUMENTS  LAW 


INTRODUCTORY. 

TO 

TITLE    II. 

WITH  AN  OUTLINE  OF  THE  BUSINESS  FEATURE 
OF  THE  FEDERAL  RESERVE  BANK  ACT. 


BILLS    OF    EXCHANGE. 


The  provisions  of  the  Act  embraced  in  this  second 
Title  relate  to  bills  of  exchange.  They  define  a  bill,  de- 
clare what  its  form  shall  be,  how  presentment  for  ac- 
ceptance must  be  made,  the  rights  of  parties  to  bills 
drawn  in  a  set,  the  manner  of  accepting  and  paying  for 
honor  and  how  protest  must  be  made  when  it  is  required. 
Its  provisions  in  regard  to  protest  are,  of  course,  ap- 
plicable to  negotiable  instruments  other  than  bills  of  ex- 
change when  it  is  to  be  made.  The  First  Title  of  the 
Act,  Sections  1  to  125  inclusive,  applies  to  all  negotiable 
instruments  and  its  provisions  are  applicable  alike  to 
bills  of  exchange  and  promissory  notes. 

As  has  already  been  said,  while  the  use  of  bills  of  ex- 
change is  at  present  comparatively  less  extensive  in  this 
country  than  in  England  and  on  the  Continent  it  is  never- 
theless of  great  advantage  to  know  the  law  applicable  to 
the  interpretation  of  the  rights  and  duties  of  the  parties 
to  a  bill.  This  is  particularly  true  in  view  of  the  declared 
purpose  of  the  Federal  Reserve  Bank  Act  the  principal 
business  feature  of  which  is  intended  to  promote  their  use 
in  this  country  as  a  means  of  discount.  These  instruments 
are  expected  to  become  a  considerable  part  of  the  re- 
sources of  banks  and  that  Act  being  designed  to  encourage 
their  use,  if  it  is  successful  in  its  endeavor  it  is  expected 
that  it  will  entirelv  transform  the  conditions  under  which 


INTRODUCTOKY   TO  TITLE    U  193 

commercial  paper  is  bought  and  sold,  loans  effected  be- 
tween banks,  and  funds  transferred  from  one  part  of  the 
country  to  another.  It  is  the  theory  of  those  who  have 
advocated  this  change  in  our  banking  laws  that  if  a  dis- 
count market  is  created  in  this  country  similar  to  and 
as  wide  reaching  as  those  of  the  principal  financial 
centers  of  Europe,  with  a  controlling  influence  to  be  ex- 
ercised by  the  Federal  Reserve  Board  and  Banks,  in 
most  respects  like  that  exercised  by  the  great  central 
banks  of  England,  Germany  and  France,  the  discount  of 
commercial  paper  between  banks  will  become  one  of  the 
principal  functions  of  the  business  banks  and  not  a  mere 
incident  to  the  business  of  banking,  as  at  present. 

In  each  of  the  twelve  Federal  Reserve  Cities  in  which 
Federal  Reserve  Banks  have  been  established  the  bank- 
ing activities  of  the  district  which  each  is  to  sen-e  will  be 
centered.  These  banks  are  to  be  primarily  banks  of  re- 
discount, that  is,  they  will  deal  only  with  their  member 
banks,  and  they  are  intended  to  supply  the  varying  need 
for  money  in  their  districts,  and  in  the  country  generally, 
by  sending  to  one  place  any  abnormal  supply  which  may 
be  required  when  local  facilities  are  inadequate  to  meet 
the  local  demand,  and  withdrawing  afterward  whatever 
surplus  may  exist  whenever  these  extraordinary  require- 
ments have  been  met  and  normal  business  conditions 
again  prevail.  The  method  by  which  local  business  banks 
will  be  able  to  obtain  funds  to  supply  their  customers 
needs  when  their  own  supply  is  inadequate  is  altogether 
by  re-discount  with  the  Federal  Reserve  Banks  of  the 
commercial  paper  in  which  their  own  funds  are  invested. 
What  it  is  hoped  to  accomplish  and  the  manner  in  which 
it  is  to  be  done  are  best  set  forth  in  the  report  of  the 
Banking  and  Currency  Committee  which  accompanied  the 
bill  and  from  which  I  quote  the  following: 


194  THE  NEGOTIABLE  INSTRUMENTS  LAW 

"In  Section  14  (which  is  Section  13  in 

The  business        ^j^g  j^j^  ^g  enacted)  is  set  forth  the  funda- 

section  of  the  ' 

new  banking         mental  business  purpose  of    the    bill    in 

and  currency  providing  for  re-discount  operations.  The 
Federal  Reserve  Banks  are  at  the  outset 
authorized  to  receive  current  deposits  from  their  stock- 
holders or  from  the  Government  or  from  other  Federal 
Reserve  Banks  in  so  far  as  the  latter  may  need  to  keep 
funds  with  them  for  exchange  purposes. 

"The  fundamental  requirement  throughout  all  of  the 
discount  section  of  the  proposed  bill  is  that  antecedent 
to  the  performance  of  a  service  by  a  Federal  Reserve 
Bank  for  a  member  bank  which  applies  therefor  the  mem- 
ber bank  shall  indorse  or  guarantee  the  obligations  whicli 
it  offers  for  discount.  Subject  to  this  requirement,  the 
proposed  bill  first  of  all  provides  that  notes  and  bills  hav- 
ing a  maturity  of  not  over  90  days  and  drawn  for  agri- 
cultural, industrial  or  commercial  purposes  or  the  pro- 
ceeds of  which  have  been  used  for  such  purposes  shall 
be  admitted  to  re-discount.  The  meaning  of  this  provi- 
sion is,  briefly,  that  any  paper  drawn  for  a  legitimate 
business  purpose  of  any  kind  may  be  re-discoimted  when 
within  90  days  of  maturity.  It  does  not  mean  that  the 
paper  thus  re-discounted  shall  have  been  originally  made 
for  90  days  bnt  that  it  shall  have  at  the  time  of  being  re- 
discounted  90  days  more  to  nm.  Thus  a  paper  drawn 
for  120  days  originally  could  be  re-discounted  when  it 
was  30  days  old.  In  view  of  the  great  difficulty  of  defin- 
ing 'commercial  paper'  the  actual  definition  of  the  same 
has  been  left  to  the  Federal  Reserve  Board  in  order  that 
it  may  adjust  the  definition  to  the  practices  prevailing 
in  ditf  erent  parts  of  the  country  in  regard  to  the  transac- 
tion of  business  and  the  making  of  paper.  For  obvious 
reasons  it  is  forbidden  that  any  such  paper  shall  be  ad- 


INTRODUCTORY  TO  TITLE  II  195 

niitted  to  re-discouiit  if  made  for  the  purpose  of  carry- 
ing stocks  or  bonds.    (As  enacted  the  bill  excludes  notes 
and  bonds  of  the  United  States  from  this  prohibition.) 
"It  was  felt  that  in  some  parts  of  the  country  the  per- 
mission to  re-discount  paper  having  a  maturity  of  90 
days  might  not  fulfill  all  of  the  requirements  imposed 
by  the  business  practice  of  those  regions,  and  therefore 
it  is  provided  in  the  third  paragraph  of  Section  14  (Sec- 
tion 13  in  the  bill  as  enacted)  whenever  the  reserve  of 
any  Federal  -Reserve  Bank  is  reasonably  above  its-  re- 
quired minimum  (such  excess  margin  to  be  determined 
by  the  Federal  Eeserve  Board),  the  reserve  bank  may 
re-discount  commercial  paper  having  a  maturity  of  not 
more  than  120  days,  provided  that  not  more  than  one- 
half  of  it  shall  have  a  maturity  exceeding  90  days.   This 
is  intended  to  fulfill  the  requirements  of  portions  of  the 
country  with  an  extremely  long  term  of  credit,  but  it  is 
clear  that  no  reserve  bank  should  be  allowed  to  put  its 
funds  into  a  form  in  which  thej  will  be  ^  tied  up '  to  such 
an  extent,  unless  such  a  bank  has  a  reserve  perfectly 
adequate  to  take  care  of  any  necessities  that  are  like- 
ly to  present  themselves  in  the  meantime, 
regard'ti'''''''  '"^   ^he  fourth  paragraph  of  Section  14  (Sec- 
acceptance  by       tion  13  in  the  bill  as  enacted)  grants  per- 
mission  to  reserve  banks  to  re-discount 
acceptances  of  member  banks  which  are  based  on  the  ex- 
portation or  importation  of  goods,  run  not  more  than 
six  months,  and  bear  the  signature  of  one  member  bank 
in  addition  to  that  of  the  acceptor,  the  total  of  such  re- 
discounts not  to  exceed  one-half  the  capital  of  the  bank 
for  which  the  re-discounts  are  made.    In  the  sixth  para- 
graph, national  banks  are  authorized  to  accept  drafts 
or  bills  of  exchange  drawn  upon  it  to  an  amount  not  ex- 
ceeding one-half  its  capital.     The  acceptance  business, 


196  THE  NEGOTIABLE  INSTRUMENTS  LAW 

which  it  is  thus  proposed  to  authorize,  is  a  new  form  of 
business  heretofore  forbidden  to  national  banks,  by  rea- 
son of  the  provisions  and  interpretations  of  the  national 
banking  act,  which  have  forbidden  them  to  lend  their 
credit  or  to  incur  contingent  liabilities  thereby.  The  ac- 
ceptance form  of  loan  is,  however,  very  common  in 
Europe,  and  has  been  found  exceedingly  serviceable. 
It  is  the  opinion  of  expert  bankers  that  it  could  be  ap- 
plied in  the  United  States  to  excellent  advantage.  The 
following  extract  from  a  discussion  of  acceptances  by 
Lawrence  Merton  Jacobs  explains  the  method  and  pur- 
poses of  the  acceptance  business : 

''  'The  fundamental  difference  between  European  and 
American  banking  has  its  origin  in  the  dissimilarity  be- 
tween the  evidences  of  indebtedness  which  lie  behind  the 
item  of  loans  and  discounts.  It  is  most  strikingly  evi- 
denced in  the  fact  that  time  bills  of  exchange  form  a 
considerable  proportion  of  the  resources  of  the  great 
banks  of  London,  Paris  and  Berlin,  whereas  the  assets 
of  leading  New  York  banks  are  largely  based  on  stocks 
and  bonds. 

"Bankers'  Bills"  "  '  ^^^  *^®  ^^^^^  ^^  exchange  in  which  are 
in  Europe.  employed,   either  through  loans   or  dis- 

counts, the  funds  of  European  banks,  an  essential  part 
consists  of  what  are  known  as  bankers'  bills— that  is, 
bills  drawn  on  bankers  and  accepted  by  them  on  behalf 
of  customers  in  accordance  with  arrangement  previously 
made.  They  are  bills  in  exchange  for  which,  by  sale  to 
a  broker  or  by  discounting  at  a  bank,  bankers'  customers 
or  those  to  whom  they  are  indebted  may  secure  immediate 
credit.  In  some  instances  it  is  arranged  that  the  cus- 
tomers themselves  shall  draw  the  bills  and  in  others  that 
the  bills  shall  be  drawn  by  third  parties  for  their  account. 
In  granting  the  accommodation  the  obligation  that  the 


INTRODUCTORY   TO  TITLE   II  197 

bankers  take  upon  themselves  is  that  they  will  accept 
the  bills  upon  presentation.  This  acceptance  consists  in 
the  bankers  writing  across  the  face  of  the  drafts  the  word 
'' Accepted,"  adding  their  signature  and  the  date.  It  is 
in  the  nature  of  a  certification  that  the  bills  will  be  paid 
at  maturity — that  is,  a  specified  number  of  days  or 
months  from  the  date  appearing  in  the  acceptance,  or 
three  days  later  if  grace  is  allowed,  as  in  England.  When 
a  banker  grants  accommodation  to  a  customer  by  means 
of  an  acceptance,  he  may  secure  himself  in  various  ways. 
Ordinarily,  a  banker  accepts  a  customer's  draft  merely 
upon  his  general  responsibility,  the  banker's  risk  being 
much  the  same  as  if  he  had  discounted  the  customer's 
note  running  a  certain  length  of  time.  Where  the  cus- 
tomer is  an  importer  the  banker  ordinarily  accepts  the 
drafts  upon  the  delivery  to  him  of  the  documents  cover- 
ing the  shipment,  which  documents  he  then  turns  over 
to  his  customer  against  a  trust  receipt.  When  a  credit 
of  this  kind  is  opened  the  usual  practice  is  for  the  banker 
to  require  the  signature  of  a  form  containing  an  agree- 
ment to  hold  him  harmless  for  accepting  the  bills,  to* 
place  him  in  funds  sufficient  to  pay  off  the  bills  three 
days  prior  to  their  maturity,  and  to  pay  him  a  commis- 
sion on  the  transaction,  this  commission  varying  accord- 
ing to  the  length  of  time  the  bills  are  to  run  and  the 
financial  standing  of  the  customer.  The  cost  of  the  ac- 
commodation to  the  customer  is  this  commission  plus  the 
prevailing  rate  of  discount  for  bankers'  bills. 

''  'In  the  United  States  the  national- 
The  discount  •    i       i      i.  4. 

system  in  the       bank  act  does  not  permit  banks  to  accept 

United  States.  ^-j-^-^^  ]j-||g  drawn  on  them.  Although  the 
act  does  not  specifically  prohibit  such  acceptances,  the 
courts  have  decided  that  national  banks  have  no  power 
to  make  them.    This  restriction  has  had  a  very  consid- 


198  THE  NEGOTIABLE  INSTRUMENTS  LAW 

erable  influence  upon  the  development  of  banking  in  this 
country.  For  some  time  after  the  passage  of  the  na- 
tional-bank act,  merchants  and  manufacturers  provided 
themselves  with  funds  by  discounting  their  promissory 
notes  with  their  local  banker.  G-radually,  however,  many 
concerns  finding  that  their  needs  were  outstripping  the 
banking  accommodation  which  they  could  secure  in  their 
immediate  vicinity,  came  to  place  their  notes  in  the  hands 
of  brokers  who  in  turn  disposed  of  them  to  such  bankers 
as  possessed  greater  surplusses  than  they  could  satis- 
factorily invest  at  home.  It  is  this  method  of  borrowing 
which  is  now  largely  employed.  In  other  words,  the  pro- 
hibition of  bank  acceptances  has  led  to  the  creation  of  a 
vast  amount  of  promissory  notes  instead  of  time  bills  of 
exchange. 

^  „.  ,.  .  "  'The  difference  between  these  two 
A  pubhc  discount 

market  will  be  classes  of  instruments  accounts  to  a  great 
W  u/on  tS  extent  for  the  difference  between  Euro- 
transactions.  pean  and  American  banking.  In  the  case 
of  the  time  bills  of  exchange  drawn  on  and  accepted  by 
prime  banks  and  bankers  there  is  practical  uniformity 
of  security.  In  the  case  of  our  promissory  notes  or  com- 
mercial paper  there  is  no  such  uniformity,  the  strength 
of  the  paper  depending  on  the  standing  of  miscellaneous 
mercantile  and  industrial  concerns. 

"  'It  is  this  uniformity  of  security  on  the  one  hand 
which  makes  possible  a  public  discount  market ;  it  is  the 
lack  of  it  in  single-name  paper  which  makes  such  a  mar- 
ket impossible.  As  a  result,  Ave  have  great  discount 
markets  in  London,  Paris  and  Berlin  and  none  in  New 
York.  In  European  centers  the  discount  rate  is  the  rate 
upon  which  the  eyes  of  the  financial  community  are  fixed. 
In  New  York  it  is  the  rate  for  day-to-day  loans  on  the 
stock  exchange.'  " 


INTRODUCTORY  TO  TITLE   II  199 

To  what  extent  and  how  rapidly  the  new  form  of  credit 
which  tlie  bill  is  so  admittedly  designed  to  encourage 
will  supplant  the  present  method  by  which  the  industries 
of  our  country  supply  themselves  with  funds  will  depend 
vei-y  largely  upon  the  si)irit  in  which  the  banks  accept 
the  proposed  change.  A  variety  of  opinion  exists.  Some 
of  the  most  prominent  bankers,  whose  expressions  upon 
the  subject  are  regarded  as  profound  authority,  have 
expressed  the  belief  that  it  will  be  impossible  to  replace, 
to  any  great  extent,  the  firmly  established  method  of 
making  loans  on  promissory  notes  bearing  one  or  more 
individual  or  firm  names,  maturing  on  time  or  demand 
and  taken  either  directly  from  the  individual  seeking 
funds  or  purchased  from  note  brokers  whose  facilities 
enable  them  to  place  their  instruments  in  markets  wher- 
ever a  surplus  of  funds  is  known  to  be  seeking  invest- 
ment. These  instruments,  they  believe,  bearing  bank  in- 
dorsements, will  form  the  largest  part  of  the  re-discount 
operations  of  the  Federal  Reserve  Banks.  In  the  Eu- 
ropean markets  the  acceptances  given  by  lianks  are,  on 
the  other  hand,  by  far  more  predominant  and  these  are 
of  two  principal  kinds  of  bills :  the  Documentary  Bill 
and  the  Commercial  Credit  Bill. 

^,    ^  .  ^      The  first  form  is  that  of  a  bill  to  which 

The  documentary  ,,     i     j       t* 

till.  shipping    documents    are    attached,      it, 

under  this  form  of  credit,  when  it  shall  come  into  use 

here  the  American  merchant  desires  to  make  purchases 

abroad  he  will  first  arrange  with  his  bank  to   accept 

drafts  for  his  account  drawn  upon  his  bank  or  its  foreign 

representative  to  which  shall  be  attached  the  documents 

covering  the  shipment  of  his  purchases.     The  foreign 

merchant  from  Avhom  he  makes  his  purchases,  having 

first  been  assured  in  some   satisfactory  way  that  his 

draft  will  be  accepted,  usually  by  being  shown  the  bank's 


200  THE  NEGOTIABLE  INSTRUMENTS  LAW 

agreement  to  accept,  will  find  a  ready  sale  to  his  local 
banker  for  the  bill  which  he  will  draw  for  the  account 
of  his  American  customer.  In  due  time  his  bill  with 
invoice  and  document  of  shipment  attached  will  be  for- 
warded for  acceptance  to  the  American  bank  upon  which 
it  is  drawn  and  upon  its  acceptance  the  shipping  docu- 
ments will  be  released  to  the  American  merchant.  This 
bill  now  bearing  the  acceptance  of  the  American  bank, 
whose  primary  obligation  it  now  is,  is  prepared  to  enter 
the  discount  market  which  is  to  be  created  here  or  those 
already  established  in  Europe  upon  an  equal  credit  foot- 
ing with  the  acceptances  of  foreign  banks.  The  effect 
of  this  transaction  is  that  the  American  merchant,  by  the 
payment  of  a  small  commission,  has  availed  himself  of 
the  credit  of  his  bank  to  pay  his  obligation  abroad,  and 
will  be  expected  to  conclude  his  part  of  the  agreement  by 
placing  the  bank  whose  credit  he  has  used  in  funds  to 
pay  the  bill  a  few  days  prior  to  its  maturity.  "When  a 
bill  is  to  be  drawn  by  an  American  exporter  the  pro- 
cedure, long  established,  is  just  the  same,  the  bill  being 
then  drawn  upon  the  American  representative  of  the 
foreign  bank,  principall}^  because  few  of  our  own  banks 
are  engaged  in  this  kind  of  operations. 

The  commercial  The  second  form  of  bank  acceptances, 
credit  bill.  the  Commercial  Credit  Bill,  is  that  bill 

which,  to  every  practical  purpose,  is  the  equivalent  of  a 
loan  by  the  bank  to  its  customer  upon  his  promissory 
note  with  the  important  difference,  however,  that  instead 
of  being  a  loan  of  cash  it  is,  like  the  one  above  described, 
a  loan  of  its  credit  by  the  bank  to  its  customer.  It  means 
that  the  bank  permits  its  customer  to  draw  on  it  at  some 
agreed  maturity  upon  the  understanding  that  the  cus- 
tomer Avill  supply  the  accepting  bank  with  funds  to  pay 
the  bill  before  it  falls  due.     The  bank  is  then  not  re- 


INTKODUCTORY  TO   TITLE  II  201 

quired  to  advance  any  of  its  own  cash  but  merely  to  give 
its  signature  to  an  acceptance  which  its  customer  is  en- 
abled readily  to  discount  at  some  other  bank,  or  with  a 
broker  or  to  individuals  wiio  will,  without  doubt,  be 
attracted  to  this  form  of  investment,  and 
tank  is  enabled  to  use  the  cash  thus  realize^ 

acceptances.  ^^  j^jg  bijginess.    To  the  customer,  there  is 

a  distinct  advantage  in  this  type  of  credit  and  to  th^ 
bank  an  equally  marked  gain.  In  those  countries  where 
this  system  of  credit  is  employed  the  rate  of  interest 
for  a  cash  advance  is  very  much  higher  than  the  discount 
rate  for  acceptances  and  it  is,  as  a  rule,  more  advan- 
tageous to  the  customer  to  draw  on  the  banker  and  pay 
the  charges  for  acceptance  and  discount  rather  than  to 
pay  the  higher  interest  rate  for  a  cash  advance.  To  the 
banker,  having  no  available  loanable  cash,  the  accept- 
ance business  enables  him  to  sell  his  bank's  credit  with 
profit. 

Another  form  of  bill  of  exchange  much 
Customer's  bills  .      -r^  ,    •  -,    r. 

(trade  m  use  m  JtLiuropean  countries   and  lor- 

acceptances) .  merly  extensively  employed  in  our  own, 
is  the  time  bill  drawn  by  the  merchant  or  manufacturer 
upon  his  customer  and  accepted  by  him.  Long  ago,  in 
certain  parts  of  this  country,  the  use  of  this  bill  began  to 
be  discontinued  as  our  industries  gradually  -assumed  a 
cash  basis,  obtaining  the  money  needed  to  carry  on  their 
business  operations  by  direct  loans  or  loans  obtained 
through  note  brokers,  by  means  of  their  own  promissory 
notes  placed  with  banks  having  loanable  funds.  Drafts 
drawn  by  the  merchant  or  manufacturer  upon  his  cus- 
tomer now  rarely  appear  here  except  in  their  limited 
use  as  instruments  of  value  only  for  the  purpose  of  col- 
lecting outstanding  accounts. 


202  THE  NEGOTIABLE  INSTRUMENTS  LAW 

Inasmuch  as  it  has  heretofore  been  the 
Bills  based  on  •     n        n 

actual  custom  of  banks  to  carry  practically  all 

commercial  ^^  their  customers'  paper,  it  bein^  even 

transactions  . 

desirable  as  regarded  suspiciously  as  a  circumstance 

avaUaSe^for  affecting  their  solvency  if  any  do  not,  the 
re-discount.  evidences   of   the   banks'   investments  in 

the  form  of  promissory  notes  have  not  been  available  for 
the  investment  of  funds  of  other  banks  except  in  the 
restricted  vicinity  and  among  the  correspondents  of  some 
of  the  banks  in  the  larger  cities  which  have  had  the 
courage  to  undertake  re-discount  operations.  It  has  been 
thought  entirely  unwise  that  the  credit  operations  of 
banks  shall  be  thus  limited  or  that  they  must  dejDend 
to  such  a  great  degree  upon  the  facilities  of  note  brokers 
for  placing  desirable  credit  instruments  in  markets  where 
idle  funds  often  await  investment  without  any  demand 
for  them.  It  is,  therefore,  one  of  the  main  purposes  of 
the  Federal  Reserve  Bank  Act  to  promote  the  use  of  bills 
of  exchange  between  merchants,  manufacturers  and  per- 
sons engaged  in  agricultural  pursuits,  and  their  custom- 
ers, and  the  return  of  these  instruments  as  proper  and  de- 
sirable items  of  bank  discounts  is  expected  to  result  as 
one  of  the  important  consequences  of  the  business  fea- 
tures of  the  bill.  It  may  also  be  expected  that  the  revival 
of  their  use  in  domestic  transactions,  as  distinguished 
from  bills  "arising  out  of  the  import  and  export  of  goods, 
will  not,  at  first,  meet  with  the  hearty  co-operation  of 
the  banks  for  the  reason  that  our  industries  are  now 
regarded  as  unchangeably  established  upon  a  cash  basis. 
But  those  who  have  advocated  the  renewal  of  the  former 
and  the  best  use  of  these  instruments  are  hopeful  that 
the  bill  will  meet  with  success  in ,  re-establishing  this 
form  of  credit.  They  believe  that  offerings  of  these  bills 
bearing  bank  indorsement  will  freely  appear  wherever 


INTRODUCTORY  TO   TITLE   II  203 

loanable  money  can  be  located  and  that  they  will  even 
attract  the  surplus  funds  of  Federal  Reserve  Banks 
whenever  they  shall  engage  in  open  market  operations. 

The  concluding  paragraph  of  the  Committee  report  on 
the  business  feature  of  the  bill  carries  the  insinuation 
that,  after  the  banks  of  this  country  become  more  familiar 
with  the  proper  use  of  acceptances,  the  restriction  which 
limits  acceptances  by  national  banks  to  bills  growing  out 
of  export  and  import  operations  will  be  removed.  It  may 
be  hoped,  therefore,  that  eventually,  and  at  no  very  dis- 
tant date,  bills  drawn  upon  and  accepted  by  banks  for 
actual  commercial  transactions  not  limited  to  export  and 
import  operations  will  also  appear  for  investment  and 
will  largely  replace  bills  drawn  by  the  merchant  or  manu- 
facturer upon  his  customer. 

I  have  given  this  outline  of  the  business  feature  of 
the  Banking  and  Currency  Bill  in  order  to  illustrate  the 
importance  of  a  practical  knowledge  of  the  provisions 
of  this  Second  Title  of  the  Uniform  Negotiable  Instru- 
ments Law"  relating  to  Bills  of  Exchange.  As  has  been 
said  in  the  introduction  to  the  First  Title  there  is  now, 
it  seems  to  many  men,  a  greater  need  than  ever  before 
that  men  interpreting  the  law,  men  learning  the  law  as 
well  as  men  engaged  in  business,  shall  become  familiar 

with   the   provisions   of   this   Act.     Our 
Commercial  •     •    ,       t    i   j      i  , 

paper  as  the         commercial  paper  is  intended  to  be  not 

basis  for  future  ^j^jy  ^j^g  ^f  ^j^g  principal  resources  of  the 
currency  issues. 

banks  of  this  country,  as  it  already  is, 

but,  by  another  provision  of  the  Federal  Reserve  Bank 
Act,  it  is  made  now  the  partial  and  is  ultimately  to  be- 
conae  the  sole  basis  of  the  future  note  issues  of  national 
banks.  These  will,  in  the  future,  be  made  only  by  Fed- 
eral Reserve  Banks,  and  will  replace  the  present  note 
issues  of  the  business  banks  based  upon  the  security  of 


204  THE  NEGOTIABLE  INSTRUMENTS  LAW 

Government  and  in  time  of  wider  need,  upon  State  and 
Municipal  Bonds.  In  the  firm  belief  that  a  currency 
which  will  automatically  expand  and  contract  with  the 
immediate  business  needs  of  this  country  is  to  be  thus 
provided,  the  Government  is  committed  by  the  Act  to  a 
guaranty  of  its  soundness.  The  bank  notes  which  will  be 
issued  against  a  segregated  deposit  of  selected  commer- 
cial paper  and  bear  the  Government's  guaranty  of  their 
redemption  in  gold,  require  as  an  indemnity  that  an 
equivalent  amount  of  re-discounted  commercial  paper 
bearing  the  indorsement  of  one  or  more  member  banKb 
shall  be  set  aside  from  the  assets  of  the  Federal  Reserve 
Bank  which  issues  them,  and  that  there  shall  also  be  set 
aside  from  its  general  funds  40  per  cent  of  the  amount 
of  the  notes  in  gold  or  lawful  money.  With  this  dignity 
added  to  the  already  grave  importance  of  this  class  of 
our  business  obligations  a  better  knowledge  of  the  laws 
which  govern  our  commercial  paper  may  very  properly 
be  regarded  as  a  duty.  To  that  end,  the  provisions  of 
this  Second  Title  of  the  Uniform  Negotiable  Instruments 
Law,  relating  especially  to  the  one  form  of  commercial 
paper  with  which  business  men  are  not  so  familiar  as 
with  promissory  notes  and  checks,  deserve  careful  study 
and  in  this,  I  trust,  the  explanations  will  prove  to  be 
an  aid. 


§126  BILLS  OF  EXCHANGE  205 


TITLE    II 


BILLS   OF  EXCHANGE. 
SUBDIVISION     I . 


FORM  AND  INTERPRETATION. 

Section  Section 

126  A   bill  of  exchange  defined.    129     Inland  and  foreign  bills  of 

127  Bill    not    an    assignment    of  exchange. 

funds  in  hands  of  drawee.       130     When  bill  may  be  treated  as 

128  Bill  addressed  to  more  than  promissory  note. 

one  drawee.  131     Referee  in  case  of  need. 

A  bill  of  "Sec.  126.    A  bill  of  exchange  is  an 

exchange  unconditional  order  in  writing  addressed 

defined.  BY  one  person  to  another,  signed  by  the 

PERSON  giving  IT,  REQUIRING  THE  PERSON  TO  WHOM  IT  IS 
addressed  TO  PAY  ON  DEMAND  OR  AT  A  FIXED  OR  DETERMIN- 
ABLE FUTURE  TIME  A  SUM  CERTAIN  IN  MONEY  TO  ORDER  OR  TO 
BEARER. ' ' 

A  bill  of  exchange  is  more  commonly  known,  in  this 
country,  as  a  draft  and  it  is  usually,  though  not  neces- 
sarily, drawn  by  one  person  upon  another  who  is  in- 
debted to  him  or  with  whom  he  has  established  a  credit. 
There  is  no  presumption,  except  in  the  case  of  a  check, 
that  a  bill  of  exchange,  used  as  a  credit  instrument,  is 
drawn  against  an  existing  fund.^  It  directs  the  person 
upon  whom  it  is  drawn  to  pay  the  money  due  upon  the 
drawer 's  account,  or  available  to  his  credit,  to  some  other 
person  whom  he  names.  When  such  an  order  is  to  be 
issued  certain  requisites  of  form  must  be  observed.  These 
are  fixed  in  this  Act  (Title  I,  Subdivision  1)  and  while, 
as  in  other  negotiable  instruments,  the  exact  language  to 

1.     Morrison  vs.  Bailey,  5  Oh.  St.  13,  18,  64  Am.  D.  632. 
Champion  vs.  Gordon.  70  Pa.  474,  10  Am.  R.  681. 


206  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  127 

be  used  in  drawing  a  bill  is  not  prescribed,  the  substance 
of  the  law  must  be  complied  with.     (See  Sec.  10.) 

The  bill  must,  of  course,  be  in  writing,  signed  by  the 
person  who  draws  it  and  must  name  the  person  upon 
whom  it  is  drawn,  and  who  is  to  pay  it,  with  the  degree 
of  certainty  required  by  Section  1  of  Title  I.  It  must 
mention  the  sum  of  money  to  be  paid  and  the  time  when 
it  is  to  be  paid,  with  the  certainty  required  by  Sections 
1  and  2.  The  time  may  be  stated  to  be  on  demand,  usu- 
ally in  a  bill  of  exchange  termed  ' '  at  sight, ' '  or  it  may  be 
fixed  at  a  stated  period  after  date,  sight  or  demand.  As  a 
rule  bills  of  exchange  are  not  dra^vn  for  a  longer  matur- 
ity than  six  months  and  domestic  bills  rarely  for  that 
long.  The  bill  may  also  be  drawn  to  become  payable  at 
a  given  time  after  the  happening  of  an  event  which  is 
certain  to  happen  or  its  maturity  may  be  fixed  in  any 
of  the  ways  mentioned  in  Section  1  of  this  Act. 

A  bill  which  is  not  dra%vn  substantially  in  the  manner 
described  in  this  Act  will  not  be  regarded  as  a  negotiable 
bill  of  exchange.     (See  Sec.  10.) 

Bill  not  an  "Sec.  127.     A  bill  of  itself  does  not 

assignment  of  operate  as  an  assignment  of  the  funds 
funds  in  hands     in  the  hands   of  the  drawee  available 

drawer.  -pQ-^      rpg-E      PAYMENT      THEREOF;      AND      THE 

DRAWEE  IS  NOT  LIABLE  ON  THE  BILL  UNLESS  AND  UNTIL  HE 
ACCEPTS  THE   SAME." 

The  bill  of  itself,  even  if  drawn  against  existing  funds, 
does  not  operate  as  an  assignment  of  the  money  in  the 
hands  of  the  person  upon  whom  it  is  drawn  and  who  has 
funds  of,  or  is  indebted  to  the  person  who  draws  it  and 
which  are  to  be  applied  to  its  payment.  The  drawer  may 
withdraw  his  funds  or  direct  the  drawee  to  apply  them 
in  some  other  way  if  he  does  so  before  the  bill  is  pre- 
sented and  accepted.  The  relation  of  the  drawee  to  the 
drawer  of  the  bill  does  not  change  and  the  drawee  does 


§127  BILLS  OF  EXCHANGE  207 

not  become  liable  upon  the  bill  unless  he  accepts  it.  The 
drawee's  acceptance  of  the  instrument,  however,  creates 
an  obligation  from  him  to  the  holder  and  all  other  parties 
to  the  instrument,  and  he  must  then  pay  the  money  due 
upon  the  bill  at  its  maturity.  When  the  drawee  acceiJts 
the  ))ill  he  is  thereupon  entitled  immediately  to  appro- 
priate sufficient  of  the  drawer's  funds  to  enable  him  to 
pay  it  if  the  bill  was  issued  against  a  deposit. 

This  section  has  its  most  frequent  application  in  the 
determination  of  the  liability  of  a  bank  to  the  holder  of 
a  check  upon  which  the  drawer  has  stopped  payment. 
Applied  in  its  simple  sense  its  language  leaves  the  bank 
under  no  uncertainty  as  to  its  position  in  such  a  situa- 
tion. The  bank  is  not  liable  to  the  holder  of  a  check  upon 
which  payment  has  been  stopped  unless  it  has  certified 
or  accepted  the  check.  Its  certification  is  by  Section  187 
made  the  equivalent  of  an  acceptance  and  after  certifica- 
tion the  check  must  be  paid  to  a  holder  in  due  course. 
It  does  not  then  matter  whether  the  certification  was 
given  before  or  after  receipt  of  the  stop-pa^mient  order, 
or  was  given  by  other  mistake.-  The  payee  of  a  check 
certified  by  mistake  cannot  enforce  it  against  the  certify- 
ing bank  because  his  position  has  not  been  altered  to  his 
injury  or  prejudice  by  the  mistake,^  but  anyone  who 
takes  it  from  him  without  notice,  may  recover  upon  it. 
The  nature  and  extent  of  the  acceptor's  engagement  up- 
on acceptance  or  certification  are  explained  in  Section  62. 

2.  Union  Trust  Co.  vs.  Preston  Nat'l  Bank,  136  Mich.  460,  99  N. 

W.  399. 
Baldinger,  etc,  Mfsi'.  Co.  vs.  Mfrs.  &  Citizen's  Trust  Co.,  156 
N.  Y.  S.  445. 

3.  Baldino-er,  etc.,  Mfg-.  Co.  vs.  Mfrs.  &  Citizen's  Tmst  Co.,  156 

N.  Y.  S.  ^45. 


208  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  128 

Bill  addressed  to  ' '  ^^^-  l^^-  ^  ^^^^  ^^^  ^^  addressed  to 
more  than  one  two  or  more  drawees  jointly,  whether 
drawer.  they  are  partners  or  not  ;  but  not  to  two 

"Wisconsin.  q^  more  drawees  in  the  alternative*  or 

IN  SUCCESSION." 

A  bill,  meaning  a  negotiable  bill  of  exchange,  may  be 
drawn  upon  two  or  more  persons  jointly,  even  though 
they  are  not  partners,  but  a  negotiable  bill  may  not  be 
drawn  upon  one  person  or  another  so  that  the  holder 
may  or  is  required  to  present  it  to  one  or  the  other ;  and 
it  may  not  be  drawn  upon  two  or  more  persons  in  a  man- 
ner which  requires  presentment  first  to  one  and  then  to 
another  in  successive  order. 

Inland  and  ''Sec.    129.      An    inland    bill    of    ex- 

foreign  bills  of  change  is  a  bill  which  is,  or  on  its  face 
exchange.  purports  to  be,  both  drawn  and  payable 

WITHIN    THE    SAME    STATE.       AnY    OTHER   BILL   IS    A    FOREIGN 

bill.  Unless  the  contrary  appears  on  the  face  of  the 
bill,  the  holder  may  treat  it  as  an  inland  bill." 

Any  bill  which  appears  upon  its  face  to  be  drawn  and 
payable  at  a  place  (not  necessarily  the  same  place)  with- 
in the  same  State  is  called  an  ''inland  bill."  All  others 
are  foreign  bills,  and  in  these  are  included,  of  course, 
bills  drawn  in  foreign  countries  to  be  payable  in  our 
o\vn^  and  checks  issued  in  one  State  and  drawn  upon  a 
bank  in  another.^  But  if  the  bill  is  so  drawn  that  it  is 
not  apparent  upon  its  face,  that  is,  if  it  cannot  be  deter- 
mined from  the  face  of  the  instrument  alone,  without 
the  aid  of  anything  else,  that  it  is  payable  outside  of  the 
State  in  which  it  was  drawn  the  holder  may  treat  it  as 
an  inland  bill.  The  distinction  between  inland  and  for- 
eign bills  is  of  importance  upon  dishonor,  for  it  is  pro- 
vided in  the  Act  that  while  the  former  may    be    pro- 


4.  Amsinck  vs.  Rogers,  189  N.  Y.  252. 

Casker  vs.  Kuhne,  159  App.  Div.  (N.  Y.)  389. 

5.  Mankey  vs.  Hoyt,  27  S.  D.  561. 


§  130  BILLS  OF  EXCHANGE  209 

tested  upon  dishonor  tlie  latter  must  be,  in  order  to  fix 
the  liability  of  secondary  parties.  (Section  152.) 
When  biU  may  ''^^c.  130.  Where  in  a  bill  deawer 
be  treated  as  and  dr-^wee  are  the  same  person,  or 
promissory  note,  where  the  drawer  is  a  fictitious  person,* 
"Wisconsin.  q^  ^  person  not  having  capacity  to  con- 

tract; the  holder  may  treat  the  instrument,  at  his 
option,  either  as  a  bill  of  exchange  or  a  promissory 

NOTE." 

The  holder  of  the  bill  may  treat  it  as  a  promissory  note 
if  the  drawer  and  drawee  are  the  same  person,  that  is, 
if  a  partner  draws  on  his  firm,*^  if  one  makes  a  draft 
upon  himself,  or  the  bill  is  drawn  upon  him  by  or  by  him 
upon  his  agent  or  his  branch  house.'^  Likewise,  if  the  per- 
son upon  w^hom  it  is  draw^n  is  a  fictitious  person  meaning, 
as  has  already  been  said  (Sec.  9),  one  who  does  not  exist, 
or  if  existing,  is  a  person  who  has  not  and  was  not  intend- 
ed to  have  any  interest  in  the  instrument  and  whose  name 
is  used  merely  for  the  purpose  of  deception.  If  the 
drawee  has  no  capacity  to  contract,  as  a  person  under 
some  legal  disability,  for  example,  a  person  not  of  legal 
age,  a  person  of  unsound  mind,  one  the  subject  of  a 
guardianship,  or  an  officer  of  a  corporation  who  has  no 
legal  authority  to  bind  the  corporation  by  contract,  the 
holder  may  then  treat  the  bill  as  the  promissory  note  of 
the  drawer.  AVhen  any  of  these  conditions  exist  the  right 
to  treat  the  instrument  as  a  promissory  note  or  as  a  bill  of 
exchange  is  optional  with  the  holder.  He  has  this  option 
also  if  the  instrument  is  so  ambiguous  that  there  is  doubt 
whether  it  is  a  bill  or  a  note.  (See  Sec.  17.)  If  he  elects 
to  treat  it  as  a  promissory  note,  the  rights,  duties  and 
liabilities  of  the  parties  to  the  bill  are  like  those  of 

6.  New  York,  etc.,  Co.  vs.  Selma  Savgs.  Bk.,  51  Ala.  305. 
New  York,  etc.,  Co.  vs.  Meyer,  51  Ala.  325. 
Porthouse  vs|  Parker.  1  Camp  (Eng.)  82. 

7.  First  Nat'l  Bk.  vs.  Home  Ins.  Co.,  16  N.  M.  66. 
Clemens  vs.  Staunton  Co.,  61  Wash.  419. 


210  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  131 

maker,  indorser  and  payee  of  a  note  and  it  is  governed 

by  appropriate  provisions  of  this  Act  other  than  those 

especially  applicable  to  bills  of  exchange. 

of  need.  "Sec.  131.     The  de\wer  of  a  bill  and 

Referee  in  case    any    indoeser    may    insert    thereon    the 

NAME  of  a  person  TO  WHOM  THE  HOLDER  MAY  EE„SORT  IN 
CASE  OF  NEED,  THAT  IS  TO  SAY,  IX  CASE  TFTE  BILL  IS  DISHON- 
ORED BY  NON-ACCEPTANCE  OR  NON-PAYMENT.  SuCH  PERSON 
IS  CALLED  THE  REFEREE  IN  CASE  OF  NEED.  It  IS  IN  THE  OP- 
TION OF  THE  HOLDER  TO  RESORT  TO  THE  REFEREE  IN  CASE  OF 
NEED  OR   NOT,  AS   HE   MAY  SEE  FIT." 

A  referee  in  case  of  need  is  sometimes  named  in  the 
bill  when  the  drawer  or  indorser  has  doubt  of  the  will- 
ingness or  ability  of  the  person  upon  whom  it  is  drawn 
to  either  accept  or  pay  the  instrmnent,  or  both,  and  does 
not  desire  to  have  the  bill  meet  mth  dishonor.  He  there- 
fore refers  the  holder  to  a  person  other  than  the  drawer 
whom  he  expects  to  accept  or  pay  it,  if  tlie  one  upon 
whom  the  instrument  is  drawn  fails  or  refuses  to  do  so. 
Any  indorser  may  insert  the  name  of  a  referee  at  his  in- 
dorsement or  at  any  other  place  on  the  bill. 

The  reference  in  case  of  need  is  not  usuallly  employed 
unless  it  is  of  the  utmost  importance  to  the  drawer  or  in- 
dorser that  the  bill  shall  be  accepted  and  paid,  as  when  it 
is  drawn  at  a  considerable  distance,  or  under  special  cir- 
cumstances and  then  as  a  rule,  only  when  it  is  desirable  to 
provide  against  damages  and  costs  on  re-exchange  or 
when  the  circumstances  seem  to  the  drawer  or  indorser  to 
warrant  this  precaution  in  order  to  preserve  his  credit. 
The  referee  in  case  of  need  usually  pays  the  bill  after  pro- 
test upon  its  dishonor  by  the  drawer  but  he  may  become 
the  acceptor  for  honor  and  if  he  does  it  will  be  necessary 
to  observe  the  requirements  of  subdivision  5  of  this  Title 
in  order  to  preserve  his  liability.  In  foreigii  bills  drawn" 
in  foreign  countries  the  reference  is  indicated  by  the 
French  words :  ''Au  hesoin,  ches  M. "  and  the  thing 


§  131  BILLS  OF  EXCHANGE  211 

to  do  when  a  bill  is  dishonored  which  contains  these 
words  is  to  protest  it  and  present  it  to  the  person  indi- 
cated who  will  very  likely  accept  or  pay  it  for  the  honor 
of  the  party  who  inserted  the  reference  in  the  bill.  If  he 
pays  the  bill  for  honor  the  provisions  of  subdivision  6 
of  this  Title  will  determine  his  rights  and  his  duties,  and 
they  prescribe  the  manner  in  which  the  payment  for 
honor  must  be  made.  You  will  observe  that  the  holder  is 
not  required  to  resort  to  the  referee  in  case  of  need  but 
mav  do  so  if  he  think  fit. 


212  THE  NEGOTIABLE  INSTRUMENTS  LAAV        §  132 


SUBDIVISION  II. 


Acceptance. 

Section  Section 

132  Acceptance,  how  made,  etc.   137     Liability   of  drawee   retain- 

133  Holder    entitled    to    accept-  i"g  ^r  destroying  bill. 

ance  on  bill.  ^^^     Acceptance     ot     nicomplete 

134  Acceptance  by  separate  in-    ^39     ^^^^^^  ^^  acceptances. 

stiiament.  -^^^     ^yj^^^   constitutes   a   general 

135  Promise     to     accept;     when  acceptance. 

equivalent   to   acceptance.    141     Qualified   acceptance. 

136  Time  allowed  drawee  to  ac-    142     Rights  of  parties  as  to  qual- 

cept.  ified   acceptance. 

Acceptance,  how  ''Sec.  132.  The  acceptance  of  a  buAj 
made,  etc.  is  the  signification  by  the  drawee  of  his 

ASSENT  TO  THE  ORDER  OF  THE  DRAWER.  ThE  ACCEPTANCE 
MUST  BE  IN  WRITING  AND  SIGNED  BY  THE  DRAWEE.  It  MUST 
NOT  EXPRESS  THAT  THE  DRAWEE  WILL  PERFORM  HIS  PROMISE 
BY  ANY  OTHER  MEANS  THAN  THE  PAYMENT  OF  MONEY. 

AVlien  the  person  upon  whom  a  bill  is  drawn  which 
requires  presentment  intends  to  pay  it  (see  Sec.  1-43  for 
the  kind  which  do),  he  expresses  his  intention  by  "ac- 
cepting" the  bill  when  it  is  exhibited  and  presented  to 
him.  He  must  do  this  by  writing  appropriate  words 
upon  the  bill,  or  upon  a  separate  paper  (Sec.  134)  and 
he  must  sign  it.  The  drawee  usually  writes  the  word 
"accepted"  across  the  face  of  the  bill,  and  signs  his  name 
underneath.  Indeed,  you  will  see  that  by  the  next  sec- 
tion the  holder  is  given  the  right  to  require  the  accept- 
ance to  be  written  on  the  bill.  If  the  drawee  dates  his 
acceptance,  and  he  must  do  it  if  a  date  is  necessary  to 
fix  the  maturity  of  the  bill,  he  ought  to  date  it  as  of  the 
day  when  the  presentment  was  made.  (Sec.  136.)  K 
the  date  is  omitted  and  one  is  necessary  to  fix  the  ma- 


§  133  BILLS  OF  EXCHANGE,  ACCEPTANCE  213 

turity  of  the  bill,  any  liolder  may  insert  its  true  date. 

(Sec.  13.) 

The  drawee's  acceptance  is  his  promise  to  pay  the  bill 

when  it  becomes  due  and  he  is  not  permitted  to  express 

any  other  means  of  payment  than  payment  in  money.    He 

may,  however,  state  in  the  acceptance  that  the  holder  may 

have  the  option  to  require  him  either  to  pay  the  bill 

in  money  or  do  something  in  lieu  thereof  (Sec.  5),  but  if 

the  acceptance  attempts  to  put  any  obligation  upon  the 

holder   to   receive   any   other  means   of  pa^nnent   than 

money,  it  is  no  acceptance  at  all  and  the  holder  must 

treat  the  bill  as  dishonored.     The  acceptance  becomes 

effective  only  by  delivery  or  notification  (Sec.  191)  to  the 

holder  and  until  it  is  delivered  it  is  incomplete  and  it 

may  be  revoked  (Sec.  16),  unless  notice  of  the  acceptance 

has  been  given  to  the  holder.^ 

Holder  entitled  ''Sec.  133.  The  holder  of  a  bill  pre- 
to  acceptance  senting  the  same  foe  ACCEPTAisrcE  may  be- 
on  the  bill.  quiee  that  the  acceptance  be  written  on 

THE  bill,  and,  if  SUCH  REQUEST  IS  REFUSED,  MAY  TREAT  THE 
BILL  AS  DISHONORED.'' 

The  person  who  holds  the  bill  and  presents  it  for  ac- 
ceptance has  the  right  to  require  the  drawee  to  write  his 
acceptance  upon  the  bill  itself.  If  the  drawee  refuses 
to  do  this  the  holder  may  treat  the  bill  as  dishonored. 
By  universal  custom  the  proper  place  for  the  acceptance 
is  across  the  face  of  the  bill  but  an  acceptance  written 
anywhere  on  the  instrument  has  been  held  to  be  suffi- 
cient.2  Any  words  which  will  indicate  the  intention  of 
the  drawee  to  comply  with  the  order  of  the  drawer  and 

1.  First  Nat'l  Bk.  of  Murfreesboro  vs.  First  Natl  Bk.  of  Nash- 

ville, 154  S.  W.   (Tenn.)  965. 
Donavan  vs.  Flvnn,  118  Mass.  537. 
First  Nat'l  Bk.'vs.  Clark,  61  Md.  400,  48  Am.  R.  114. 
Ilsley  vs.  Jones,  12  Gray  (Mass.),  260. 

2.  First  Nat'l  Bk.  vs.  Trognitz,  14  Cal.  A.  176,  111  P.  402. 
Brannin  vs.  Henderson,  12  B.  Mon.  (Ky.)  61. 


214  THE  NEGOTIABLE  INSTRUMENTS  LAW       §  134 

pay  the  instrument  at  its  maturity,  will  be  regarded  as 
an  acceptance^  but  the  simplest,  best  manner  in  which 
it  can  be  done  is  by  writing  the  word  "accepted"  on  the 
face  of  the  bill  above  the  signature  of  the  acceptor.  It 
has  even  been  held  that  the  mere  signature  of  the  ac- 
ceptor upon  the  face  of  the  bill  is  sufficient.*  While  the 
section  now  seems  to  require  something  more  than  that, 
the  signature  of  the  drawee  appearing  across  the  face 
of  the  bill  has  repeatedly  been  held  to  import  a  full  assent 
to  the  order  of  the  drawer  and  that  parol  evidence  is 
not  admissible  to  prove  a  ditferent  intention,  but  when 
there  is  ambiguity  parol  proof  is  admissible  to  make  the 
intention  of  the  signer  clear.^  The  effect  of  an  accept- 
ance written  upon  a  paper  other  than  the  bill  itself  and 
of  a  promise  to  accept  will  appear  from  the  next  two 
sections. 

,  ''Sec.  134.     Where  an  acceptance  is 

Acceptance  by 

separate  written  on  a  paper  other  than  the  biu. 

instrument.  itself,  it  does  not  bind  the  acceptor  ex- 

°IUinois  cEPT  in  favor  of  a  person"  to  whom  it  is 

So.  Dakota.  shown  and  who,  on  the  faith  thereof, 

received  the  bill  for  value.'' 

You  will  observe  from  the  above  section  that  the  ac- 
ceptance may  be  made  on  a  separate  paper.  If  the  bill  is 
to  be  negotiated  by  the  holder  an  acceptance  upon  a 
separate  paper,  as  for  example,  by  letter  or  telegram,  is 
not  desirable  and  ought  not  be  taken  if  it  can  be  avoided, 
although,  as  this  section  provides,  and  the  custom  of  mer- 
chants sanctioned  for  the  convenience  of  mercantile  af- 


3.  O'Donnell  vs.  Smith,  2  E.  D.  Smith  (N.  Y.),  124. 
Whilden  vs.  Merch.  Nat'l  Bk.,  64  Ala.  1,  32,  38  Am.  R.  1. 

4.  Fowler  vs.  Gate  City  Nat  '1  Bk.,  88  Ga.  29. 
Schwartz  vs.  Barrinoer,  20  La.  Ann.  419. 
Wheeler  vs.  Webster,  1  E.  D.  Smith   (N.  Y.),  1. 
Haines  vs.  Nance,  52  111.  A.  406. 

Steele  vs.  McKinley,  2  App.  Cas.  754. 

5.  Cook  vs.  Baldwin,  120  Mass.  317,  21  Am.  R.  517. 
Murrell  vs.  Edwards  (Tex.  Civ.  App.),  179  S.  W.  532. 


§  135  BILLS  OF  EXCHANGE,  ACCEPTANCE  215 

fairs,  an  acceptance  on  a  separate  paper  may  be  made.^ 
Present  the  bill,  even  if  it  is  inconvenient  to  do  so,  and 
insist  upon  the  acceptance  being  written  across  its  face. 
A  separate  written  acceptance  will  bind  the  acceptor  in 
favor  of  any  one  .who  receives  the  bill  for  value  after 
its  acceptance  in  that  manner,  but  only  if  the  subsequent 
holder  has  been  shown  the  separate  acceptance  before 
taking  the  bill  and  receives  the  bill  for  value  in  reliance 
upon  it.'^ 

The  language  of  this  section  is  explicit  and  excludes 
liability  of  the  acceptor  to  persons  other  than  those  who 
receive  the  bill  for  value  from  the  holder  after  having 
been  shown  the  separate  acceptance  and  who  so  receive 
it  upon  the  faith  of  the  separate  acceptance.  This  would 
seem  to  create  no  liability  upon  the  acceptor  to  pay  the 
bill  to  the  holder  to  whom  he  gives  the  separate  accept- 
ance, and  who  already  had  the  bill  before  the  separate 
acceptance  was  given,  but  this  section  must  be  interpreted 
in  connection  with  Section  68  to  preclude  such  a  conclu- 
sion. There  it  is  provided  that  the  acceptor,  by  accept- 
ing the  instrument,  engages  that  he  will  pay  it  according 
to  the  tenor  of  his  acceptance,  and  this  section  permits 
a  separate  acceptance  to  be  taken.  Now,  of  course,  the 
acceptor's  engagement,  when  he  accepts  on  a  separate 
paper,  is  his  promise  to  the  holder  who  already  has  the 
bill  and  it  must  be  kept.  However,  all  dispute  and  delay 
in  the  enforcement  of  the  instrument  will  be  avoided 

6.  Clark  vs.  Cook,  4  East  (Eng.),  57,  102  Eeprint,  751. 
Wells  vs.  W.  U.  Tel.  Co.,  144  la.  605,  619. 

First  Nat'l  Bk.  vs.  Comm'l  Savsis.  Bk..  74  Kas.  606,  87  P.  746, 

8  L.  R.  A.  N.  S.  1148.  11  Ann.  Cas.  281 
First  Nat'l  Bk.  vs.  Muskoi^ee  Pipe  Line  Co.,  40  Okl.  603,  139 

P.  1136. 

7.  Eakin  vs.  Citizen's  St.  Bk.,  67  Kan.  338,  72  P.  874. 

First  Nat'l  Bk.  vs.  Muskogee  Pipe  Line  Co.,  40  Okl.  603,  13» 

P.  1136. 
Lehnhard  vs.  Sedway,  160  Mo.  App.  83. 


216  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  135 

if  the  acceptance  is  obtained  in  the  proper  manner,  in  its 
proper  place  upon  the  bill,  and  this  should  be  insisted 
upon  whenever  practicable. 

Promise  to  "Sec.  135.    An  unconditional  promise'' 

accept;  when  in  writing  to  accept  a  bill  before  it  is 
ecLuivalent  to  drawn  IS  deemed  an  actual  acceptance  in 
acceptance.  favor   of    every   person   who,   upon   the 

^Illinois.  FAITH     thereof,     RECEIVES     THE     BILL     FOR 

value.  ' ' 

A  promise  to  accept  a  bill  is  not  always  to  be  deemed 
an  acceptance  of  the  instrument  even  though  it  be  made 
in  writing.  However,  when  an  unconditional  promise 
to  accept  is  made  in  writing  within  a  reasonable  time 
before  the  bill  is  drawn,  it  is  regarded  as  the  equivalent 
of  and  is  considered  to  be  in  effect  an  actual  acceptance 
in  conformity  with  this  Act  in  so  far  as  those  persons 
are  concerned  who  receive  the  bill  for  value  upon  the 
faith  of  the  written  promise  to  accept  it  when  it  shall 
be  drawn.^  In  this  case  it  is  not  necessary  that  one  who 
receives  the  bill  must  be  shown  the  written  promise  to 
accept  as  in  the  last  preceding  section.  It  is  only  required 
that  he  take  the  bill  for  value  upon  the  strength  of  the 
promise,  that  is,  he  must  have  been  influenced  to  take 
the  bill  by  a  knowledge  of  the  written  promise  that  it  will 
be  accepted  Avhen  it  is  drawn.'^  In  order  to  give  to  the 
agreement  to  accept  the  effect  of  a  valid  acceptance  the 

6.     Coolidge  vs.  Payson,  2  Wheat  (U.  S.),  66,  4  L.  Ed.  185  (in  which 
will  be  found  a  full  review  of  this  subject). 
Morgantown  Bk.  vs.  Hay,  143  N.  C.  326,  55  S.  E.  81. 
Woodward  vs.  Griffiths-Marshal  Co.,  43  Minn.  260,  45  N.  W.  433. 
Smith  vs.  Ledyard,  49  Ala.  279. 
James  vs.  E.  G.  Lyons  Co.,  134  Cal.  189,  66  P.  210. 

9.     Smith  vs.  Ledyard.  49  Ala.  279. 

Woodward  vs.  Griffiths-Marshall  Co.,  43  Minn.  260,  45  N.  W. 

433. 
Mich.  Bk.  vs.  Ely,  17  Wend.  (N.  Y.)  508. 


§  186  BILLS  OF  EXCHANGE,  ACCEPTANCE  217 

bill  must  be  drawn  in  strict  accordance  with  its  terms. ^" 
But  if  the  bill  drawn  does  not  conform  to  the  agreement 
to  accept,  another  conforming  to  its  terms  may  be  drawn 
within  a  reasonable  time  after  the  date  of  the  agreement, 
and  if  it  is,  this  will  bind  the  drawee.^ ^ 

By  the  Law  Merchant,  which  governs  when  it  is  not 
otherwise  provided  in  this  Act  (Sec.  196),  authority  to 
draw  a  bill  implies  an  agreement  to  accept  it  when  it 
is  drawn,  if  the  authority  to  draw  is  known  to  and  relied 
upon  by  the  person  taking  the  bill.^^  This  authority  is 
usually  granted  in  the  form  of  a  letter  of  credit  which 
is  given  for  the  purpose  of  being  shown  to  third  parties 
by  the  person  to  whom  it  is  issued,  and  it  imposes  upon 
the  person  who  issues  it  a  binding  obligation  to  accept 
any  bill  drawn  under  its  authority  when  drawn  in  accord- 
ance with  its  conditions.  Letters  of  Credit  are  of  two 
forms :  open  and  special.  The  open  letter  is  addressed 
to  any  one  to  whom  it  may  be  presented;  the  special 
letter  to  a  specified  person,  requesting  him  to  make  ad- 
vances or  extent  credit  to  the  person  described  in  the 
letter  and  in  that  case  no  other  person  is  authorized  to 
make  advances  or  extent  credit  under  its  authority.  The 
letter,  of  either  character,  is  usually  limited  both  as  to 
time  and  amount  and  it  is  the  duty  of  the  person  making 
advances  to  satisfy  himself  that  the  authority  to  draw 
has  not  been  exceeded  in  either  particular. 

Time  allowed  ''Sec.    136.      The    drawee    is    allowed 

drawee  to  accept,  twenty-four   hours   after  presentment, 

IN  WHICH  to  decide  WHETHER  OR  NOT  HE  WILL  ACCEPT  THE 
bill;  but  the  acceptance,  IF  GIVEN,  DATES  A-S  OF  THE  DAY 
OF   PRESENTATION,"' 

10.  Hodges  vs.  Iowa  Barb.  Steel  Co.,  80  Iowa,  65,  45  N.  W.  541. 
Brinkman  vs.  Hunter,  73  Mo.  172,  39  Am.  R.  492. 
Saiilsburj'  vs.  Blandy,  53  Ga.  665. 

11.  Johnson  Vs.  Clark,  39  N.  Y.  216. 

12.  Coolid^e  vs.  Pavson.  2  Wheat  (U.  S.),  66,  4  L.  Ed.  185. 
Ruiz  vs.  Renauld,  100  N.  Y.  256,  261,  3  N.  E.  182. 


218  THE  NEGOTIABLE  INSTRUMENTS  LA\Y        §  137 

This  section  must  not  be  understood  to  grant  twenty- 
four  hours  for  the  payment  of  a  bill  payable  at  sight 
or  on  demand,  for  such  do  not  require  presentment  for 
acceptance  except  when  drawn  to  be  payable  as  is  pro- 
vided in  Sec.  143,  Sub-sec.  3,  and  are  payable  at  once. 
But  if  a  bill  payable  upon  demand  which  requires  ac- 
ceptance or  one  payable  at  a  fixed  time  is  presented  to 
the   drawee  for  acceptance,  he   is   allowed   twenty-four 
hours  from  his  first  sight  of  the  bill  within  which  to  ex- 
amine the  state  of  his  accounts  with  the  drawer  and 
determine  whether  or  not  he  will  accept  it.    If  the  bill  is 
not  left  with  him  and,  availing  himself  of  this  provision, 
the  drawee  does  not  accept  the  instrument  at  once,  the 
holder  ought  again  to  request  its  acceptance  within  the 
time  he  has  allowed  the  drawee  for  its  examination/' 
and  if  the  drawee  signifies  his  intention  of  accepting  it 
and  it  has  not  been  left  with  him,  the  holder  will,  of 
course,  take  the  bill  to  him  again.    Whether  the  bill  has 
or  has  not  been  left  with  the  drawee,  if  he  does  not  give 
the  acceptance  within  twenty-four  hours,  unless  a  longer 
time  has  been  granted,  the  holder  must  treat  the  bill  as 
dishonored.     (Sec.  150.) 

"Sec.  137.''    Where  a  drawee  to  whom 
Liability  of  ^  ^^^^  ^^  delivered    for    acceptance    de- 

retaining  or  stroys  the  same,  or  refuses  withix  twen- 

destroying  bill,     ty-four    hours    after    such    delivery   or 
"Illinois.  WITHIN  such  other  period  as  the  holder 

S.  Dakota.  ^^^^.  allow,  to  return  the  bill  accepted 

^-Wisconsin.  ^^^  non-accepted  to  the  holder  he  wiix 

BE  deemed  to  have  ACCEPTED  THE  SAME.'"' 

When  the  holder  leaves  the  bill  with  the  drawee  it  be- 
comes his  duty  to  again  call  upon  him  at  the  end  of 
twenty-four  hours,  or  such  further  time  as  he  may  have 

13.     Case  vs.  Burt,  15  Mich.  82. 

Ovei-man  vs.  Hoboken  Citv  Bk..  31  X.  J.  L.  563,  56o. 
Montoonieiv  Citv  Bk.  vs.  Albany  City  Bk.,  S  Barb.  (N.  Y.)  396. 
AVesfberg  vs.  Chicago  Lbr.  Co.,  117  Wis.  589,  94  N.W.  572. 


§  137  BILLS  OF  EXCHANGE,  ACCEPTANCE  219 

granted  foi  its  consideration,  and  request  the  drawee 
return  it,  either  accepted  or  non-accepted.  If  the  drawee 
refuses  to  return  the  bill  or  if  he  destroys  it  he  will  be 
deemed  to  have  accepted  it  and  will  be  required  to  pay 
it.  Section  150  provides  that  if  the  bill  has  been  duly 
presented  and  is  not  accepted  within  the  prescribed  time, 
the  holder  must  treat  it  as  dishonored.  You  then  see 
that  a  mere  neglect  unaccompanied  by  any  signification 
of  the  drawee's  intention  to  accept  the  bill  is  regarded 
as  a  dishonor  and  the  holder  must  treat  it  as  such.  It 
would  seem,  therefore,  that  it  would  be  an  unwise  prac- 
tice accompanied  by  considerable  risk  to  grant  a  request 
for  further  time  for  consideration  of  the  bill  if  the  request 
for  additional  time  is  made  later  than  the  day  after  the 
last  day  originally  granted.  Of  course,  a  bill  may  be  ac- 
cepted by  the  drawee  after  its  dishonor  by  non-accept- 
ance and  thus  restored  to  credit  (Sec.  138),  but  its  subse- 
quent acceptance  will  not  revive  the  holder's  right  of 
recourse  against  the  drawer  and  indorsers  if  he  lost  it 
by  failure  to  give  them  notice  of  dishonor  in  the  manner 
and  within  the  time  prescribed  in  Subdivision  7,  Sees. 
89  to  118,  inclusive,  Title  I,  if  the  drawee  failed  to  ac- 
cept within  that  time.  His  failure  to  do  so  will  have 
effected  their  discharge  (Sec.  50)  and  they  cannot  again 
be  made  liable  upon  the  instrument  except  by  their  o\m 
voluntary  act.^^"  It  seems  to  be  perfectly  proper  and 
safe-,  however,  to  grant  a  succession  of  extensions,  up  to 
the  limit  of  a  reasonable  time,  when  each  successive  ex- 
tension is  granted  before  the  expiration  of  the  one  that 
went  immediately  before  it,  and  if  this  is  done  the  bill 
need  not  be  treated  as  dishonored  by  the  drawee's  fail- 

13a.  Aebi  vs.  Bank  of  Evansville,  124  Wise.  73,  102  X.  W.  329. 
Smith  vs.  Rowland,  18  Ala.  665. 


220  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  137 

ure  to  accept  it  unless  it  remains  unaccepted  at  the  ex- 
piration of  the  last  extension.^^     (See  Sec.  150.) 

It  seems,  therefore,  that  the  mere  failure  of  the 
drawee  to  return  the  bill  if  it  has  been  left  with  him  is 
not,  of  itself,  equivalent  to  and  to  be  treated  as  an  ac- 
ceptance but  is,  on  the  contrary,  a  dishonor  of  the  in- 
strument.15  (Sec.  150.)  There  must  be  a  positive  re- 
fusal to  return  the  instrument  or  a  destruction  of  it  by 
the  drawee  before  he  is  deemed  to  have  accepted  it.^^ 

This  conclusion  is  considered  to  be  in  accordance  with 
the  best  decisions  on  this  question  and  in  accordance  with 
the  plain  meaning  of  the  Act,  although  there  are  authori- 
ties which  hold  that  the  drawee's  mere  failure  to  return 
the  bill  either  accepted  or  non-accepted  within  the  period 
allowed  him  for  its  consideration  and  examination  shall 
be  deemed  to  be  an  acceptance  of  the  instrument  ;^^  and 
some  of  these  decisions  have  been  rendered  since  the 
adoption  of  the  Act  in  States  where  it  is  in  effect. 

The  drawee's  refusal  to  return  the  instrument  or  his 
destruction  of  it  being  considered  an  acceptance,  the  in- 
strument is  not  thereby  dishonored  and  no  notice  need  be 
given  to  the  drawer  or  indorsers.  If  the  instrument  is 
a  foreign  bill  it  need  not  be  protested  as  for  non-accept- 
ance. Such  circumstances  being  unusual,  however,  should 
be  communicated  to  all  parties  to  the  instrument  imme- 
diately 'and  upon  the  maturity  of  the  bill,  its  pa\^nent 
must  be  demanded.    If  it  is  then  refused,  the  usual  pro- 

14.  Ingram  vs.  Foster,  2  Smith  K.  B.  (Enc;.)  242. 

Westbero'  vs.  Chicago  Lumber  Co.,  117  Wis.  589,  94  X.  W.  572. 

15.  St.  Louis  &  S.  W.  Ry.  Co.  vs.  James,  78  Ark.  490,  493,  95  S. 

W.  804,  8  Ann.  Cas.  611  and  note. 
Rousch  vs.  Duff,  35  Mo.  312. 
Foley  vs.  New  York  Savg's  Bk.,  79  Misc.  220,  139  N.  Y.  S.  915. 

16.  Westburg  vs.  Chicago  Lbr.  Co.,  117  Wis.  589,  94  N.  W.  572. 

17.  Wisner  vs.  First  Nat'l  Bk.,  220  Pa.  21,  68  A.  955,  17  Am  S.  R. 

955.  17  L.  R.  A.  N.  S.  1266  and  note. 


§  138, 139     BILLS  OF  EXCHANGE,  ACCEPTANCE  221 

ceedings  upon  dishonor  must  be  taken  to  charge  the 
drawer  and  indorsers. 

Acceptance  of  ' '  Sec.  138.    A  bill  may  be  accepted  be- 

incomplete  bill,  foee  it  has  been  signed  by  the  drawer. 
OR  while  otherwise  incomplete,  or  when  it  is  overdue, 
OR  after  it  has  been  dishonored  by  a  previous  refusal 
to  accept,  or  by  non-payment.  But  when  a  bill  payable 
after  sight  is  dishonored  by  non-acceptance  and  the 

DRAWEE  subsequently  ACCEPTS  IT,  THE  HOLDER,  IN  THE  AB- 
SENCE of  any  different  agreement,  IS  ENTITLED  TO  HAVE 
THE  BILL  ACCEPTED  AS  OF  THE  DATE  OF  THE  FIRST  PRESENT- 
MENT." 

It  is  not  necessary  that  the  bill  shall  be  complete  and  be 
sig7ied  by  the  drawer  before  it  is  accepted.  The  acceptor 
may  place  his  acceptance  upon  it  before  it  is  signed  by 
the  drawer  or  while  it  is  yet  incomplete  in  any  other  re- 
spect. If  it  is  overdue  or  has  previously  been  refused 
by  the  drawee  and  dishonored  by  non-acceptance  or  by 
non-payment,  he  may  nevertheless  accept  it  and  thus  re- 
store it  to  credit. 

But  if  the  instrument  is  one  payable  at  a  period  after 
sight  and  therefore  requires  that  the  acceptance  be  dated 
in  order  to  fix  its  maturity,  and  if  it  has  been  dishonored 
by  non-acceptance  and  the  drawee  afterward  accepts  it, 
the  holder  may  require  him  to  date  his  acceptance  as  of 
the  date  when  the  bill  was  first  presented  to  him.  By 
agreement,  however,  between  the  holder  and  the  accept- 
or, the  acceptance  may  be  given  any  other  different  date. 
Attention  is  called  to  the  fact,  however,  that  an  instru- 
ment is  payable  on  demand  when  it  is  negotiated  after 
maturity.     (Sec.  7.) 

Kinds  of  *'Sec.   139.     An  acceptance  is  either 

acceptances.  general  or  qualified.    A  general  accept- 

ance ASSENTS  WITHOUT  QUALIFICATION  TO  THE  ORDER  OF 
THE  DRAWER.  A  QUALIFIED  ACCEPTANCE  IN  EXPRESS  TERMS 
VARIES  THE  EFFECT  OF   THE  BILL  AS   DRAWN." 


222  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  140 

By  accepting  the  bill  generally  the  acceptor  agrees 
fully  to  the  order  of  the  drawer,  agrees  to  pay  the  instru- 
ment in  exactly  the  manner,  terms  and  amount  and  at 
the  time  and  place  named  by  the  drawer  in  the  bill,  to  the 
person  to  whom  the  bill  directs  him  to  pay  it  or  to  the 
holder.  By  a  qualified  acceptance  the  acceptor  promises 
to  pay  it  subject  to  the  terms  which  he  himself  im- 
poses at  his  acceptance  and  such  an  acceptance  changes 
the  effect  of  the  bill  to  the  extent  that  the  qualification 
imposed  by  the  acceptor  may  vary  the  terms  expressed 
by  the  drawer  when  he  drew  the  bill.  A  qualified  ac- 
ceptance is  in  effect  a  new  offer  which  in  turn  requires 
the  consent  of  the  parties  already  liable  on  the  bill  be- 
fore it  will  become  a  binding  contract.^*  The  intention 
to  qualify  must  be  clear  and  unmistakable  and  the  lan- 
guage used  by  the  acceptor  will  be  taken  most  strongly 
against  himself. ^^  Tf  it  does  not  distinctly  vary  the  terms 
of  the  bill  the  acceptance  will  be  regarded  as  general.^" 
Continue  now  to  the  next  section  and  then  read  these  two 
in  connection  with  Section  62  and  what  is  said  there 
upon  the  liability  of  the  acceptor. 

What  constitutes       "Sec.   140.     An  acceptance  to  pay  at 
a  general  a  particular  place  is  a  general  accept- 

acceptance.  ance,  unless  it  expressly  states  that  the 

BILL  IS  to  be  paid  THERE  ONLY  AND  NOT  ELSEWHERE." 

A  general  acceptance  has  already  been  partially  de- 
fined in  the  preceding  section.  This  section  is  intended 
to  lay  down  the  rule  that  an  acceptance  in  which  the 
only  condition  named  by  the  acceptor  is  that  he  will  pay 
the  instrument  at  a  particular  place,  without  expressly 

18.  Stotesburg  vs.  Massengale,  13  Mo.  App.  221.  226. 
Mvers  vs.  Standai-t,  11  Oh.  St.  29.  37. 

19.  Sylvester  vs.  Staples,  44  Me.  496. 

20.  Mvers  vs.  Standart,  11  Oh.  St.  29. 

Clark  vs.  Gordon,  37  S.  C.  L.  311,  45  Am.  D.  768. 
Todd  vs.  State  Bk.,  3  Bush  (Kv.),  626. 
Citv  Bk.  vs.  Lauman.  19  X.  Y.  477. 


§  141  BILLS  OF  EXCHANGE,  ACCEPTANCE  223 

stating  that  he  will  pay  it  there  only,  and  not  elsewhere, 
is  not  a  qualified  acceptance,  but  that,  notwithstanding 
the  imposition  of  this  condition,  such  an  acceptance  is 
considered  to  ))e  a  general  one.  The  holder  is  not  bound 
to  present  the  instrument  for  payment  at  the  place  named 
by  the  acceptor  if  he  does  not  see  fit  to  do  so.  An  instru- 
ment accepted  in  this  manner  must  nevertheless  be  pre- 
sented for  payment  at  the  place  of  payment  named  in  the 
bill  itself  if  one  is  designated,  but  if  none  is  designated 
it  may  be  presented  at  the  acceptor's  residence  or  usual 
place  of  business.  But,  of  course,  as  a  matter  of  accom- 
modation and  convenience  the  bill  ought  to  be  presented 
at  the  place  designated  by  the  acceptor  in  his  acceptance 
if  the  instrument  does  not  require  presentment  else- 
where. But  now  see  the  next  section  for  the  effect  of 
an  acceptance  which  designates  that  the  acceptor  will 
pay  at  a  particular  place  and  there  only. 

Qualified  '^Sec.  141.     An    acceptance    is    quau- 

acceptance.  fied  which  is  : 

1.  Conditional,  that  is  to  say,  which  makes  payment 

BY    the    acceptor    DEPENDENT    ON    THE    FULFILLMENT    OF    A 

condition  therein  stated; 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part 

ONLY  OF  the  amount  FOR  WHICH   THE  BILL  IS   DRAWN  ; 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only 
at  a  particular  place  ; 

4.  Qualified  as  to  time  ; 

5.  The  acceptance  of  some  one  or  more  of  the 
drawees,  but  not  of  all." 

Section  62  provides  that  the  accej)tor  engages,  that  is, 
he  promises  and  agrees  to  pay  the  bill,  only  in  accord- 
ance w4th  the  terms  of  his  acceptance  and  the  holder 
can  not  require  payment  upon  any  other  than  the  terms 
of  his  qualification  if  he  takes  such  an  acceptance.  The 
next  section  declares  that  the  holder  may  refuse  to  take 
a  qualified  acceptance.     Tf  he  does  take  it  he  will  have 


224  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  141 

to  abide  by  its  terms  and  the  burden  of  proving  compli- 
ance with  the  qualification  or  condition  imposed  by  the 
acceptor  in  his  acceptance  rests  upon  the  holder.^^ 

The  acceptance  is  qualified  when  the  acceptor  prom- 
ises to  pay  the  instrument  only  upon  the  happening  or 
fulfillment  of  some  condition  which  he  names,  or  the 
happening  of  some  independent  event.  This  is  fre- 
quently done  in  such  bills  as  are  accompanied  by  docu- 
ments of  shipment  as,  for  example,  when  the  acceptance 
is  given  to  become  payable  only  upon  the  actual  arrival 
of  the  shipment  to  pay  which  it  is  drawn,  or  surrender 
of  bill  of  lading,^^  or  upon  completion  of  work  in  prog- 
ress of  construction. 22  Another  frequent  use  of  this 
form  of  qualified  acceptance  is  the  acceptance  of  the  bill 
payable  "when  in  funds,"  which  means  that  the  ac- 
ceptor will  pay  only  when  the  person  for  whose  account 
the  bill  is  dra^vTi  shall  have  provided  him  with  the  money 
with  which  to  do  so.  Such  a  condition  is  fulfilled  only 
when  the  draw^er  puts  the  acceptor  in  possession  or 
control  of  actual  funds  for  the  purpose  of  paying  the 
bill.-^  The  possession  of  securities,  goods,  or  property, 
although  of  a  value  more  than  sufficient  to  pay  the  bill, 
does  not  fulfill  the  condition.^^ 

If  the  acceptor  agrees  to  pay  only  a  part  of  the  amount 
called  for  by  the  bill,  his  acceptance  is  qualified  and  he 
becomes   liable  only  for  the  amount  for  which  he  ac- 

21.  Coloradc  Nat.  Bk.  vs.  Boettcbcr,  5  Colo.  185,  191,  40  Am.  Rep. 

142. 
Ford  vs.  Angelrodt,  37  Mo.  50,  55,  88  Am.  Dee.  174. 

22.  Lamon  vs.  French,  25  Wis.  37.  40. 

23.  Hogan  vs.  Globe  Mut.  Bldg.  Assn.,  140  Cal.  610,  74  P.  153. 
Burns  Lbr.  Co.  vs.  Doyle,^  71  Conn.  742,  43  A.  483,  71  Am. 

S   R  235 
Cook  vs.  Wolfendale,  105  Mass.  401. 

24.  Wallace  vs.  Douglas,  116  N.  C.  659,  21  S.  E.  387. 

25.  Campbell  vs.  Petteugill,  7  Me.  126,  129,  20  Am.  D.  349.     . 
Carlisle  vs.  Hooks,  58  Tex.  420. 


§  142  BILLS  OF  EXCHANGE,  ACCEPTANCE  225 

cepted.^^    The  drawee's  acceptance  is  also  qualified  when 
he  engages  to  pay  the  instrument  only  at  a  particular 
place  in  a  city  which  he  names  and  that  place  is  not 
the  place  named  in  the  bill,  or  if  he  states  in  it  that  he 
will  pay  it  only  at  a  particular  time  which  is  not  the 
time  named  in  the  bill,  or  he  intentionally  restricts  or 
modifies  the  time  of  payment  named  in  the  bill  in  any 
way.    An  acceptance  is  also  qualified  if  it  is  made  by  one 
or  more  of  the  drawees  but  not  by  all  who,  by  the  terms 
of  the  instrument,  are  required  to  accept  it,  unless  the 
one  accepting  has  authority  to  accept  for  all.    (Sec.  145.) 
If  the  acceptor  attempts  to  qualify  his  acceptance  by 
promising  performance  by  any  other  means   than  by 
the  payment  of  money  it  does  not  amount  to  even  a  qual- 
ified acceptance  and  the  instrument  must  be  treated  as 
dishonored.     (Sec.  132.)     But  if  his  acceptance,  in  addi- 
tion to  promising  payment  in  money  as  required  in  the 
bill,  gives  the  holder  the  option  to  require  something 
to  be  done  in  lieu  thereof,  it  is  not  qualified.     (Sees.  5 
and  132.) 

Rights  of  parties  ''Sec.  142,  The  holder  may  eefuse  to 
as  to  qualified  take  a  qualified  acceptance,  and  if  he 
acceptance.  j^Q^g  ^^^^  obtain  an  unqualified  accept- 

ance, HE  MAY  TREAT  THE  BILL  AS  DISHONORED  BY  NON-AC- 
CEPTANCE.    Where  a  qualified  acceptance  is  taken,  the 

DRAWER  AND  INDORSERS  ARE  DISCHARGED  FROM  LIABILITY  ON 
THE  BILL,  UNLESS  THEY  HAVE  EXPRESSLY  OR  IMPLIEDLY  AU- 
THORIZED THE  HOLDER  TO  TAKE  A  QUALIFIED  ACCEPTANCE,  OR 
SUBSEQUENTLY  ASSENT  THERETO.  WhEN  THE  DRAWER  OR 
AN  INDORSER  RECEIVES  NOTICE  OF  A  QUALIFIED  ACCEPTANCE, 
HE  MUST,  WITHIN  A  REASONABLE  TIME,  EXPRESS  HIS  DISSENT 
TO  THE  HOLDER,  OR  HE  WILL  BE  DEEMED  TO  HAVE  ASSENTED 
THERETO.'' 

26.  Ray  vs.  Faulkner,  73  111.  469. 

27.  Fanshawe  vs.  Peet,  2  H.  &  N.  1,  4  E.  R.  C.  243. 
Myers  vs.  Standart,  11  Oh.  St.  29. 

Niagara  Dist.  Bk.  vs.  Fairman  Maeh.  Tool  Co.,  31  Barb. 
403. 


226  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  142 

When  a  qualified  acceptance  is  made  or  offered  the 
holder  may  refuse  to  take  it.  He  is  entitled  to  have  a 
general  acceptance  and  if  he  does  not  obtain  it  he  im- 
perils his  right  of  recourse  upon  the  drawer  and  in- 
dorsers  of  the  bill.  If  he  suft'ers  loss  by  reason  of  having 
taken  a  qualified  acceptance  he  cannot  recover  from  the 
parties  secondarily  liable  upon  the  instrument  unless, 
before  he  takes  it,  he  obtains  authority  from  each  of  them 
to  do  so,  or,  having  taken  it  and  notified  them,  they 
assent  to  it.  Their  assent  as  well  as  their  authority 
may  be  either  expressly  given  or  it  may  be  implied 
from  their  words  or  conduct  in  regard  to  the  matter. 
(See  Sec.  82  for  explanation  of  the  express  waiver  and 
of  waiver  by  implication.) 

Upon  receiving  notice  that  a  qualified  acceptance  is 
offered  ])y  the  drawee,  or  has  been  taken,  the  drawer  and 
indorsers  must,  within  a  reasonable  time,  express  their 
dissent,  that  is,  their  refusal  to  consent  that  the  holder 
may  take  it,  and  anyone  who  does  not  express  dissent  is 
considered  to  have  assented  thereto.  What  is  considered 
a  reasonable  time  must  be  determined  from  Section  193. 
That  section  provides  that  the  particular  facts  and  cir- 
cumstances of  each  case  and  the  customs  of  a  particular 
place  and  business  must  be  taken  into  consideration. 

In  general  a  qualified  accei^tance  should  be  refused  by 
the  holder  and  the  instrument  proceeded  upon  as  upon 
dishonor  unless  the  acceptance  offered  fully  protects 
the  rights  of  all  parties  to  the  bill.  It  has  already  been 
seen  that  an  instrument  once  dishonored  by  non-accept- 
ance or  even  by  non-payment  may  afterward  be  accepted 
and  restored  to  credit.  (Sec.  138.)  By  giving  notice  of 
dishonor  to  the  drawer  and  all  indorsers,  the  holder  will 
preserve  his  rights  pending  an  unqualified,  general  ac- 
ceptance, or  until  such  time  as  the  drawer  and  indorsers 


§  142  BILLS  OF  EXCHANGE,  ACCEPTANCE  227 

shall  expressly  authorize  him  to  take  the  qualified  ac- 
ceptance offered  by  the  drawee ;  but,  of  course,  the  holder 
must  use  sound  judgment  in  such  a  matter  as  this  and 
not  hand  over  the  bill  for  dishonor  and  protest  unless 
his  own  interests  and  the  rights  of  other  parties  re- 
quire it. 


Section 

148 

When     presentment     is     ex- 
cused. 

149 

When    dishonored    by    non- 

150 

acceptance. 
Duty   of   holder   where   bill 

151 

not  accepted. 
Rights  of  holder  where  bill 

not  accepted. 

228  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  143 


SUBDIVISION    III. 
PRESENTMENT  FOR  ACCEPTANCE. 

Section 

143  When   presentment   for   ac- 

ceptance must  be  made. 

144  Wlien  failure  to  present  re- 

leases    drawer     and     in- 
dorser. 
345     Presentment;  how  made. 

146  On  what  days   presentment    151 

may  be  made. 

147  Presentment    when    time    is 

insuflScient. 

"V^en  *'Sec.   143.     Presentment   for  accept- 

presentment  for     ance  must  be  made  : 

acceptance  must        1,     Where  the  bill  is  payable  after 
be  made.  sight,  or  in  any  other  case,  where  pre- 

sentment  FOR   acceptance   IS    NECESSARY   IN    ORDER   TO    FIX 

the  maturity  of  the  instrument;  or, 

2.  Where  the  bill  expressly  stipulates  that  it  shall. 

BE  presented  for  ACCEPTANCE;  OR, 

3.  Where  the  bill  is  drawn  payable  elsewhere  than 

AT  the  residence  OR  PLACE  OF  BUSINESS  OF  THE  DRAWEE. 

In  no  OTHER  CASE  IS  PRESENTMENT  FOR  ACCEPTANCE  NEC- 
ESSARY IN  ORDER  TO  RENDER  ANY  PARTY  TO  THE  BILL  LIABLE.'' 

Presentment  for  acceptance  must  not  be  confused  with 
presentment  for  payment,  the  provisions  applicable  to 
which  are  to  be  found  in  Sections  76  to  89  of  Title  I. 

Presentment  for  payment  is  always  required  in  order 
to  charge  the  drawer  and  indorsers  on  the  instrument, 
except  as  it  is  otherwise  provided  in  this  Act,  while  the 
instrument  need  not  be  presented  for  acceptance  unless 
this  section  expressly  requires  that  it  shall  be  done. 
This  section  of  the  Act  designates  when  presentment 
for  acceptance  must  be  made,  and  in  no  other  case  is  it 
necessary. 


§  U;3  BILLS  OF  EXCHANGE  229 

Whether  the  instrument  is  an  inland  or  a  foreign 
bill,  if  it  is  payable  at  a  fixed  period  after  sight  or 
demand,  or  if  it  is  subject  to  any  condition  requiring 
acceptance  in  order  to  fix  its  maturity,  it  must  be  pre- 
sented for  acceptance.  It  must  be  presented,  of  course, 
if  it  expressly  provides  that  it  shall  be. 

The  third  sub-section  which  requires  presentment  when 
the  bill  is  payable  elsewhere  than  at  the  drawee's  resi- 
dence or  usual  place  of  business  effects  a  change  in  the  . 
law  in   some   States.     It  has  been  held  that  a   bill  of 
exchange  payable  upon  a  day  certain  or  at  sight,  or  on 
demand  after  date,  need  not  be  presented  for  acceptance 
even  though  the  place  of  payment  which  it  names  is  not 
the  drawee's  usual  place  of  business  or  residence;  that 
presentment  for  payment  alone  is  necessary  to  charge 
the  drawer  and  indorsers  upon  such  a  bill.    Sub-section  3 
nullifies  all  these  decisions  and  a  bill  of  exchange  pay- 
able at  a  designated  certain  time,  or  at  sight,  or  on 
demand  after  its  date  at  any  place  other  than  the  resi- 
dence or  usual  place  of  business  of  the  drawee,  must 
first  be  presented  to  the  drawee  for  acceptance  before 
being  presented  to  him  for  payment.     If  it  is  not  pre- 
sented for  acceptance  the  drawer  and  all  indorsers  will 
be  discharged.     It  is  no  longer  sufficient  or  proper  to 
await  the  maturity  of  a  bill  so  drawn  and  present  it  for 
payment.    It  must  be  first  presented  for  acceptance. 

Since  a  bill  may  be  presented  for  payment  at  the 
residence  or  usual  place  of  business  of  the  drawee  if 
it  specifies  no  other  place  of  payment  (Sec.  73),  such  an 
instrument  need  not  be  presented  for  acceptance  because 
of  the  provision  of  Sub-section  3,  but  if  its  presentment 
for  acceptance  is  required  for  some  other  reason  it  must 
be  made.  If  such  a  bill  is  presented  for  acceptance 
on  the  day  of  its  maturity  and  acceptance  is  refused  it 


230  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  144 

need  not  again  be  presented  for  payment,^  but  in  such 
a  case  the  delay  to  make  presentment  must  be  satisfac- 
torily accounted  for.     (See  next  section  and  Sec.  147.) 

It  must  not  be  understood  from  the  provisions  of  this 
section  that  instruments  which  do  not  require  accept- 
ances may  not  be  presented.  On  the  contrary,  it  is  usual 
and  best  if  the  bill  is  intended  for  further  negotiation, 
to  present  it  for  acceptance  even  when  it  is  payable  at 
a  certain  future  day,  for  it  cannot  otherwise  be  known 
whether  or  not  the  instrument  will  be  paid,  nor  can  the 
drawee's  liability  upon  the  instrument  be  fixed  in  any 
other  way.2 

Wlien  failure  to  ''Sec.  144.  Except  as  heeein  other- 
present  releases  wise  provided,  the  holder  of  a  bill  which 
drawer  and  is  required  by  the  next  preceding  sec- 

indorser.  tion  to  be  presented  for  acceptance  must 

either  present  it  for  acceptance  or  negotiate  it  within 
A  reasonable  time.  If  he  fail  to  do  so,  the  drawer  and 
all  inporsers  are  discharged." 

So  long  as  a  bill  which  requires  presentment  continues 
to  be  negotiated  it  need  not  be  presented  for  acceptance, 
but  its  negotiation  may  not  be  delayed  for  an  un- 
reasonable length  of  time.  The  holder  to  whom  such 
an  instrument  is  transferred  may  pass  it  on  in  the  usual 
course  of  business  by  indorsement  or  delivery,  according 
to  the  character  of  the  bill,  and  it  may  thus  circulate 
from  one  person  to  another  for  an  indefinite  length  of 
time,  if  payable  on  demand,  or  until  the  day  of  its  ma- 
turity if  payable  at  a  fixed  time,  but  it  must  not  stop 
too  long  in  its  course  without  further  negotiation.  One 
who  does  not  intend  to  negotiate  the  instrument  further 
should  at  once  present  it  to  the  drawee  for  acceptance 

1.  Plate  vs.  Reynolds,  27  N.  Y.  586. 

2.  Nat'l  Park  Bk.  vs.  Saitta,  127  App.  Div.   (N.  Y.)   624,  628,  111 

N.  Y.  8.  927,  89  N.  E.  1106. 


§  144  BILLS  OF  EXCHANGE  231 

and  if  the  instrument  is  in  the  hands  of  an  agent,  for 
collection,  he  is  required  to  do  so.^ 

What  is  an  unreasonable  delay  will  be  determined  in 
accordance  with  Section  193.  In  this  connection  Section 
71  and  what  is  there  said  is  referred  to  and  should  be 
read.  The  custom  of  merchants  and  banks  differs  in 
regard  to  presentment  of  notes  and  of  bills  and  what 
would  be  considered  a  reasonable  delay  as  to  the  first, 
might  be  and,  in  their  present  use,  probably  would  be 
regarded  unreasonable  as  to  the  other.  Drafts  or  bills 
as  they  are  now  used  in  this  country,  contemplate  more 
prompt  negotiation  and  presentment  both  for  acceptance 
and  payment  than  do  promissory  notes  and  it  would 
be  entirely  unsafe  to  delay  presentment  of  a  bill  for 
acceptance  for  the  same  length  of  time  for  which  one 
might  safely  delay  the  presentment  of  a  note  for  pay- 
ment. Either  negotiate  the  bill  within  a  short  time  after 
its  receipt  or  present  it  to  the  drawee  for  his  accept- 
ance. No  rule  of  delay  can  be  given,  for  the  facts  of 
each  particular  case  and  the  custom  of  each  community 
or  l)usiness  are  to  be  regarded.  (Sec.  193.)  The  failure 
of  the  holder  to  present  the  bill  for  acceptance  or  to 
negotiate  it  within  a  reasonable  time  will  release  the 
drawer  and  all  indorsers  who  became  parties  prior  to 
that  one  who  is  chargeable  with  the  delay,  no  matter 
where  his  position  may  be  in  the  chain  of  title,  or  at 
what  time  in  the  negotiation  of  the  bill  the  unreasonable 
delay  occurs,  and  their  release  will  relieve  them  of  all 
liability  to  him  and  to  the  endorsers  subsequent  to  him. 
(See  Sees.  7,  53,  71.) 

Of  course,  you  have  observed  the  provision  in  Sec.  127, 
by  which  the  drawee  does  not  become  liable  upon  the  bill 
unless  and  until  he  accepts  it.     A  bill,  therefore,  which 

3.     Allen  vs.  Snydam,  17  Wend.  368,  see  note  in  34  Am.  Dec.  310. 


232  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  145 

continues  to  be  negotiated  without  acceptance  remains 
merely  an  order  upon  the  drawee  to  pay  the  sum  it  men- 
tions, but  does  not  become  his  obligation  to  pay  until  it 
obtains  his  acceptance. 

Presentment;  "Sec.   145.     Presentment  for  accept- 

how  made.  ance  must  be  made  by  or  on  behalf  of 

THE  HOLDER  AT  A  REASONABLE  HOUR,  ON  A  BUSINESS  DAY  AND 
before  the  bill  is  OVERDUE,  TO  THE  DRAWEE  OR  SOME  PER- 
son authorized  to  accept  or  refuse  acceptance  on  his 
behalf;  and: 

1.  Where  a  bill  is  addressed  to  two  or  more  drawees 
WHO  are  not  partners,  presentment  must  be  made  to 

them  all,  unless  one  HAS  AUTHORITY  TO  ACCEPT  OR  REFUSE 
ACCEPTANCE  FOR  ALL,  IN  WHICH  CASE  PRESENTMENT  MAY  BE 
made  TO  HIM  ONLY; 

2.  Where  the  drawee  is  dead,  presentment  may  be 

made  to  his  PERSONAL  REPRESENTATIVE  ; 

3.  Where  the  drawee  has  been  adjudged  a  bankrupt 
or  an  insolvent  or  has  made  an  assignment  for  the 
benefit  of  creditors,  presentment  may  be  made  to  him 
or  to  his  trustee  or  assignee.'' 

The  manner  of  making  the  presentment  is  prescribed 
in  this  section.  When  presentment  for  acceptance  is 
required  it  must  be  made  before  the  instrument  is  over- 
due, by  the  holder  or  some  one  acting  for  him,  and  it 
must  be  made  to  the  person  named  in  the  bill  as  the 
drawee  or  to  some  one  to  whom  he  has  given  authority 
to  accept  or  refuse  the  bill  in  his  behalf.  If  an  accept- 
ance is  taken  from  or  the  presentment  is  made  to  any 
person  other  than  the  drawee,  it  is  the  holder's  duty  to 
satisfy  himself  that  the  person  who  accepts  on  behalf 
of  the  drawee  is  authorized  to  so  do  or,  if  no  acceptance 
is  obtained,  to  satisfy  himself  that  the  person  who  re- 
fuses the  bill  is  likewise  acting  by  the  drawee's  author- 
ity,^ and  the  holder  may  require  the  agent  to  show  the 

4.     Wiseman  vs.  Chiapella,  23  How.  (U.  S.)  368,  16  L.  Ed.  466. 
Sharp  vs.  Drew,  9  Ind.  281. 
Sehuchardt  vs.  Hale,  36  Md.  5901,  11  Am.  R.  514. 


§145  BILLS  OF  EXCHANGE  233 

nature  and  extent  of  the  authority  he  claims  to  have 
This  authority  may  have  been  expressly  given  or  it  may 
be  implied  from  the  relations  between  the  drawee  and  the 
person  who  acts  for  him.  The  principles  of  the  law  of 
agency  from  which  it  can  be  determined  whether  the 
person  accepting  or  refusing  to  accept  the  instrument  on 
behalf  of  his  principal  are  discussed  at  Section  19,  Title  I. 
The  presentment  must  be  made  at  a  reasonable  hour  on  a 
business  day.  In  this  connection,  read  Sections  72  and  85 
and  what  is  there  said  in  regard  to  presentment  for  pay- 
ment. The  requirements  of  those  two  sections  and  of 
this  one  are  alike  and  it  will  not  be  necessary  to  repeat 
the  explanations  here. 

The  provisions  of  Sub-sections  1  and  3  of  this  section 
are  similar  to  those  in  regard  to  giving  notice  of  dis- 
honor when  the  bill  is  addressed  to  two  or  more  drawees 
who  are  not  partners,  or  when  the  drawee,  or  one  of  the 
drawees,  is  a  bankrupt  or  an  insolvent.  If  one  of  several 
drawees  or  one  of  a  firm  accepts  the  instrument,  he  will 
be  bound  by  his  acceptance.^  Presentment  should  then  be 
made  or  attempted  in  the  manner  explained  in  the  treat- 
ment of  the  provisions  of  the  Act  in  regard  to  giving  no- 
tice of  dishonor  under  similar  circumstances.  (See  Sees. 
100  and  101.) 

If  the  drawee  is  dead,  presentment  for  acceptance  to 
his  personal  representative  need  not  be  attempted.  It  is 
excused  and  the  bill  may  be  treated  as  dishonored  by  non- 
acceptance  (Sec.  148),  but  the  holder  may  waive  this 
provision  in  his  favor  and  present  the  bill  to  the  per- 
sonal representative  of  the  deceased  drawee  if  he  desires 
to  do  so.  If  the  bill  is  not  addressed  to  anybody  but  is 
payable  at  a  designated  place,  its  acceptance  by  anyone 

5.    Smith  vs.  Melton,  133  Mass.  369,  371. 


234  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  146 

at  that  place  will  be  deemed  to  be  an  admission  that  he 
was  intended  as  the  drawee.  (Sec.  1,  Sub-section  5.) 
The  Act  does  not  attempt  to  designate  the  place  where 
presentment  for  acceptance  must  be  made.  Where  a 
place  of  payment  is  designated  in  the  instrument  present- 
ment there  is  regarded  as  sufficient  if  the  residence  or 
place  of  business  of  the  drawee  is  unknown  to  the  holder 
and  cannot  be  ascertained  with  reasonable  diligence;  but 
where  the  drawee's  residence  or  place  of  business  is 
known,  or  can  be  ascertained  with  reasonable  diligence, 
it  is  required  that  the  presentment  be  made  to  him  at 
either  the  one  place  or  the  other.""*  And  remember  that 
when  a  bill  is  payable  elsewhere  than  at  the  residence  or 
usual  place  of  business  of  the  drawee  it  must  ))e  pre- 
sented for  acceptance  to  the  drawee  at  his  residence  or 
place  of  business  or  wherever  he  may  be  found  before  it 
is  jH-esented  for  payment  at  the  place  where  it  is  payable. 
(Sec.  143.) 

V    *   ^„«-  *'SeC.      146.       A    BILL    MAY    BE    PRESENTED 

On  what  days 

presentment  may  ^'^^^  acceptance  on  any  day  on  which  ne- 
be  made.  gotiable  instruments  may  be  presented 

"Colorado,  for  payment  under  the  provisions  of  sec- 

Kentucky,  tions  seventy-two   (72)   and  eighty-five 

Arizona ^^'  ^^'^^  ^^  ^"^^  ^^^-    "When  Saturday  is  not 

otherwise   a   holiday,   presentment   for 

acceptance    MAY'    BE    MADE    BEFORE    TWELVE    o'CLOCK,    NOON, 
ON    THAT   DAY\" 

In  connection  with  this  section  read  what  has  already 
been  said  in  explanation  of  Sections  72  and  85.  Those 
two  sections  are  expressly  made  applicable  to  this  one. 
While  under  Section  85  presentment  for  payment  of  a 
bill  falling  due  on  Saturday  should  not  be  made  until  the 
next  business  day,  a  bill  may  be  presented  for  acceptance 
upon  that  day  if  the  presentment  is  made  before  twelve 
o'clock,^  noon. 

5a.  Mason  vs.  Donsay,  35  111.  424,  85  Am.  Dec.  368. 


§  147, 148  BILLS  OF  EXCHANGE  235 

Presentment  "Sec.    147.     Where  the  holder  of  a 

when  time  is  bill  drawn  payable  elsewhere  than  at 
insufficient.  rj.^^,  place  of  business  or  the  residence 

OF  THE  drawee  HAS  NOT  TIME  WITH  THE  EXERCISE  OF  REA- 
SONABLE DILIGENCE  TO  PRESENT  THE  BILL  FOR  ACCEPTANCE 
BEFORE  PRESENTING  IT  FOR  PAYMENT  ON  THE  DAY  THAT  IT 
FALLS  DUE,  THE  DELAY  CAUSED  BY  PRESENTING  THE  BILL  FOR 
ACCEPTANCE  BEFORE  PRESENTING  IT  FOR  PAYMENT  IS  EXCUSED, 
AND   DOES   NOT   DISCHARGE   THE   DRAWER  AND   INDORSERS/' 

When  a  time  bill  which  requires  presentment  for  ac- 
ceptance by  reason  of  Sub-section  3  of  Section  143,  be- 
cause it  is  payable  at  a  place  other  than  the  residence  or 
usual  place  of  business  of  the  drawee,  comes  into  the 
possession  of  the  holder  too  late  to  permit  its  present- 
ment for  acceptance  before  presenting  it  for  payment  at 
the  place  where  payment  must  be  demanded  on  the  day 
that  it  falls  due,  any  necessary  delay  caused  by  first  pre- 
senting it  for  acceptance  is  excused.  The  holder  of  a  bill 
drawn  in  that  manner  is  required  to  present  it  for  ac- 
ceptance to  the  draw^ee  at  his  residence  or  his  place  of 
business  or  w^herever  he  can  be  found,  and  if  he  has  used 
reasonable  diligence  in  attempting  to  do  so  and  yet  is 
not  al)le  to  present  it  for  pajmient  at  the  place  of  pay- 
ment on  the  day  when  it  becomes  due,  the  delay  caused 
by  presenting  the  bill  for  acceptance  will  excuse  the  de- 
lay in  presenting  it  for  payment.  The  drawer  and  in- 
dorsers  will  not  be  discharged  by  the  failure  of  the  holder 
to  present  the  instrument  for  pajanent  upon  the  day  of 
its  maturity  if  the  delay  is  caused  by  the  time  consumed 
in  the  endeavor  to  first  present  the  bill  for  acceptance. 
The  holder  must,  however,  present  the  bill  for  pa>nnent 
at  the  place  where  it  is  drawn  to  be  payable  as  soon  as 
possible,  the  delay,  not  presentment  for  payment,  being 
excused. 

When  ''Sec,  148.     Presentment  for  accept- 

presentment  is       ance    is    excused,    and    a    bill    may''    be 
excused.  treated    as    dishonored    by    non-accept- 

ance, IN  either  of  the  following  cases  : 


236  THE  NEGOTIABLE  INSTRUMENTS  LAAV        §148 

1.  Where  the  drawee  is  dead,  or  has  absconded,  or 
is  fictitious  person  or  a  person  not  having  capacity  to 
contract  by  bill; 

2.  Where,  after  the  exercise  of  reasonable  dili- 
gence,  PRESENTMENT   CANNOT   BE   MADE  ; 

3.  Where,  although  presentment  has  been  irregu- 
lar, ACCEPTANCE  HAS  BEEN  REFUSED  ON  SOME  OTHER 
GROUND." 

Presentment  for  acceptance  need  not  be  made  or  at- 
tempted if  the  drawee  is  dead,  or  if  he  has  absconded, 
that  is,  if  he  has  departed  secretly  or  is  in  hiding  to  es- 
cape paying  his  debts  or  to  escape  arrest,  and  the  bill  need 
not  be  presented  if  the  drawee  is  a  fictitious  person.  The 
term,  ''fictitious  person"  is  used  here  as  elsew^here  in 
this  Act  in  its  very  broadest  sense.  It  means  a  non- 
existing  person,  or  if  an  existing  person,  one  who  is  not 
a  party  to  and  who  is  not  interested  in  the  instrument 
in  connection  witli  whicli  his  name  is  used  by  some  other 
person  but  w^hose  name  is  employed  for  the  purpose  of 
deception.*^     (Sec.  9.) 

Presentment  for  acceptance  is  also  excused  if  the 
drawee  is  a  person  who  has  not  the  power  to  contract 
by  bill,  that  is,  one  who  has  not  the  capacity  to  enter  into 
an  acceptance  to  which  he  can  be  held  in  law,  as  an  infant, 
or  person  under  other  legal  disability.  And  if,  after  at- 
tempting presentment  with  reasonable  diligence,  that  is, 
after  making  such  efforts  to  present  the  bill  as  an  ordi- 
narily prudent  and  careful  person  would  make  under  the 
same  or  similar  circumstances,'''  the  holder  can  not  do  so, 
its  presentment  is  then  also  excused. 

If  the  presentment  has  been  made  in  an  improper  man- 
ner and  the  bill  is  refused  by  the  drawee,  but  his  refusal 
is  stated  to  be  upon  some  other  ground,  and  not  by  rea- 

6.  Phillips  vs.  Mercantile  Nat'l  Bk.,  140  N.  Y.  556,  35  N.  E.  982, 

37  A.  S.  R.  596. 

7.  Sulsbacker  vs.  Bank  of  Charleston,  86  Tenn.  201. 


§  149.  150  BILLS  OF  EXCHANGE  237 

son  of  the  improper  presentment,  its  proper  presentment 
for  acceptance  is,  under  these  circumstances,  excused. 
When  presentment  for  acceptance  is  excused  the  drawer 
and  indorsers  of  the  bill  are  not  discharged  by  the  fail- 
ure of  the  holder  to  present  it. 

When  dishonored       "Sec.    149.     A    bilt,    is   dishonored    by 

by  non-  non-acceptance  : 

acceptance.  1^    When  it  is  duly  peesented  foe  ac-" 

CEPTAXCE,    and    SUCH    AN    ACCEPTANCE    AS    IS    PRESCRIBED    BY 

THIS  Act  is  refused  or  cannot  be  obtained;  or, 

2.     When  presentment  for    acceptance    is    excused, 

AND  the  BILL  IS  NOT  ACCEPTED. ' ' 

The  bill  becomes  dishonored  by  non-acceptance  when  it 
is  presented  and  the  kind  of  acceptance  that  is  either  • 
required  or  permitted  under  this  Act  is  refused  or  can- 
not be  obtained,  or  when  its  presentment  is  excused  by 
the  preceding  section  and  the  bill  is  not  accepted  by  the 
drawee.  As  upon  a  dishonor  by  the  refusal  of  the  drawee 
to  accept  the  bill  notice  must  then  be  given  in  accord- 
ance with  the  provisions  of  Sections  89  to  118  of  Title  I, 
Sub-division  8,  and  it  must  be  given  to  all  parties  whose 
liability  the  holder  desires  to  fix. 

Duty  of  holder  "Sec  150.     Where  a  bill  is  duly  pre- 

where  bill  not        sented    for   acceptance    and    is    not    ac- 
accepted.  cepted  within  the  prescribed  time,  the 

person  presenting  it  must  treat  the  bill  as  dishonored 

BY    non-acceptance    OR    HE    LOSES    THE    RIGHT    OF    RECOURSE 
AGAINST  THE  DRAWER  AND  INDORSERS. ' ' 

When  the  holder  has  presented  the  bill  for  acceptance 
and  it  is  not  accepted  by  the  drawee  within  the  time  pro- 
vided in  Sec.  136  and  in  the  manner  provided  in  Sec.  137 
he  must  treat  it  as  dishonored  by  non-acceptance.  If 
he  does  not  at  once  proceed  upon  its  dishonor  and  give 
notice  of  dishonor  to  the  drawer  and  all  indorsers  whom 
he  desires  to  hold  in  the  manner  provided  in  Sections  89 
to  118  inclusive,  he  w^ll  lose  his  right  of  recovery  against 


238  THE  XEGOTIABLE  Ds'STEUMEXTS  LAW       §  151 

them.  If  the  bill  appears  npon  its  face  to  be  a  foreign 
bill  (see  Sec.  129  for  definitioii)  it  must  be  protested. 
(Sec.  152.)  The  provisions  of  the  Act  in  regard  to  pro- 
test will  be  fonnd  in  the  next  Snb-division. 

Rights  of  holder  ' '  ''*^^*^-  I'^l-  ^  hex  a  biul  is  dishoxobed 
whete  hill  aok  by  xox-acceptaxce.  ax  immediate  right 
aeeefiied.  of  recoubse  agatxst  the  drawer  axd  ix- 

DORSEBS  ACCRUES  TO  THE  HOLDER  AXD  XO  PRESEXTilEXT  FOR 
PATMEXT   IS    XECCESSARY." 

The  holder  of  a  bill  which  has  become  dishonornd  by 
non-acceptance  is  not  required  to  proceed  against  the 
person  upon  whom  it  is  drawn  to  enforce  and  coUect  it, 
and  he  is  not  required  to  present  it  for  payment  after  its 
dishonor  by  non-acceptance,  unless,  with  his  consent,  it 
is  subsequently  accepted.  He  has  the  right  to  at  once 
proceed  against  the  drawer  and  indorsers  and  they  must 
pay  the  bill  regardless  of  the  solvency  of  the  drawee 
and  his  ability  to  pay.  ^Vs  upon  a  promissory  note  which 
has  become  dishonored  by  non-payment,  the  indorsers 
upon  the  bill  are  each  liable  to  the  holder  and  each  is 
liable  to  all  parties  to  the  instrument  subsequent  to  him- 
self who  may  take  it  up  and  pay  it.  The  drawer  is.  of 
course,  liable  to  all.  Their  liability  among  themselves 
is  determined  bv  Section  68,  Title  I,  Sub-divi5?ion  5. 


§  1.52  BILLS  OF  EXCHANGE.  PROTEST  239 


8rBr)ivisir)X  IV. 


Peotest. 


Section  Section 

1.52    In  what  cases  necessaiy.        158    Protest  before  niaturilhr  (for 
153    How  made,  '  better  security) , 

1.54    By  whom  made.  159    When      protest      dispensed 

155  When  to  be  made.  with. 

156  ^Vhere  made.  160    Protest  where  bill  is  lost. 

157  Protest  both  for  non-accept- 

ance and  non-payment. 

In  its  Strict  technical  sense  the  term  protest,  \rhen 
nsed  in  reference  to  commercial  paper,  means  only  the 
foiTQal  declaration  of  dishonor  drawn  np  and  signed 
by  the  person  making  the  protest.  In  its  broader,  more 
popular  sense  and  as  used  among  banks  and  men  in 
business,  it  includes  all  of  the  steps  necessary  to  charge 
the  parties  secondarily  liable  upon  the  instrument  pro- 
tested as  well  as  the  formal  declaration  of  dishonor 
called  protest,  and  if  the  protest  is  to  be  exclusively 
relied  upon  to  prove  the  liability  of  the  parties  to  be 
charged  iipon  dishonor  it  must  show  that  a  demand  was 
made  and  that  all  the  necessary  steps  were  taken  to 
fix  their  liability.^  These  steps  are  the  presentment  for 
acceptance  or  payment  at  maturity  and  the  usual  pro- 
ceedings upon  dishonor,  and  the  provisions  of  this  Act 
bv  which  these  are  governed  will  be  found  in  Sections 
70  to  lis.  iuclusive.  The  protesting  officer  must  be 
familiar  with  these  as  well  as  the  provisions  of  Sub- 
division 3  of  this  Title  upon  the  subject  of  presentment 
for  acceptance. 

1.    Peoples  Bank  vs.  Broc'ke.  31  Mvl.  7.     ^ 

Mason  vs.  Kilconrse.  71  X.  J.  Law  4«2. 


240  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  152 

In  what  cases  "Sec.  152.     Where  a  foreign  bill  ap- 

protest  FEARING  ON  ITS  FACE  TO  BE  SUCH  IS  DISHON- 

necessary.  ored  by  non-acceptance  it  must  be  duly 

PROTESTED  FOR  NON-ACCEPTANCE,  AND  WHERE  SUCH  A  BILL, 
WHICH  HAS  NOT  PREVIOUSLY  BEEN  DISHONORED  BY  NON- 
ACCEPTANCE  IS  DISHONORED  BY  NON-PAYMENT  IT  MUST  BE 
DULY  PROTESTED  FOR  NON-PAYMENT.  If  IT  IS  NOT  SO  PRO- 
TESTED, THE  DRAWER  AND  INDORSERS  ARE  DISCHARGED.  AVhERE 
A  BILL  DOES  NOT  APPEAR  ON  ITS  FACE  TO  BE  A  FOREIGN  BILL, 
PROTEST  THEREOF  IN  CASE  OF  DISHONOR  IS  UNNECESSARY.^' 

While  promissory  notes  and  inland  bills  of  exchange 
may  be  protested,  protest  is  not  necessarj^  in  order  to 
charge  any  party  upon  them  except  in  the  case  of  an 
inland  bill  of  exchange  when  it  contains  a  reference  in 
case  of  need  and  the  holder  desires  to  resort  to  the  ref- 
eree for  acceptance  (Sec.  167),  or  if  the  instrument  is 
a  bill  which  has  been  accepted  for  honor  supra  protest. 
(Sec.  167.)     Upon  the  dishonor  of  a  foreign  bill  of  ex- 
change, that  is,  a  bill,  including  a  check,  which  originated 
outside  and  is  payable  within  the  United  States,^  and, 
as  defined  in  Sec.  129,  one  which  is  not  or  does  not  from 
its  face  appear  to  be  both  drawn  and  payable  in  the 
same  State,  protest  is  necessary  and  it  is  equally  neces- 
sary whether  the  dishonor  is  by  non-acceptance  or  non- 
payment.    The  section  referred  to  also  provides  that 
"unless  the  contrary  appears  on  the  face  of  the  bill  the 
holder  may  treat  it  as  an  inland  bill."     A  bill,  then, 
which  by  Sec.  129  may  be  treated  as  an  inland  bill,  al- 
though it  is  actually  drawn  in  one  State  and  payable  in 
another  does  not  require  protest.    If  the  holder  neglects 
to  make  protest  of  a  bill  which  requires  it  he  will  lose 
all  right  of  recourse  upon  the  drawer  and  indorsers. 
They  are  discharged.    Protest  for  non-acceptance  and  for 
non-payment  are  made  in  the  same  manner  and  differ 
only  in  the  statement  of  the  cause  for  protest. 

2.     Mankey  vs.  Hoyt,  27  S.  D.  561,  132  N.  W.  230. 


§  153  BILLS  OF  EXCHANGE,  PROTEST  241 

Protest:  how  ''Sec.  153.     The  protest  must  be  an- 

made.  NEXED  TO   the   bill,   or   must   contain   a 

COPY  THEREOF,  AND  MUST  BE  UNDER  THE  HAND  AND  SEAL  OF 
THE  NOTARY  MAKING  IT,  AND  MUST  SPECIFY, 

1.  The    TIME   AND    PLACE   OF    PRESENTMENT; 

2.  The  fact  that  presentment  was  made,  and  the 
manner  thereof  ; 

3.  The  cause  or  reason  for  protesting  the  bill; 

4.  The  demand  made,  and  the  answer  given,  if  any, 
or  the  fact  that  the  drawee  or  acceptor  could  not  be 

FOUND.'' 

The  protest  is  a  writing  by  the  person  making  it, 
signed  by  him,  containing  a  copy  of  the  instrument  pro- 
tested, or  to  which  the  instrument  itself  is  attached, 
and  a  statement  that  the  instrument  was  presented  to 
the  person  obliged  to  pay  or  accept  it,  and  that  its  pay- 
ment or  acceptance  "was  refused.  The  protest  must 
specify  the  time  and  place  of  presentment  and  recite 
that  the  instrument  was  presented  to  the  drawee  or 
acceptor  or  to  some  other  person  authorized  by  him  to 
accept,  pay,  or  refuse  it,  and  that  payment  or  accept- 
ance was  demanded,  as  the  case  may  be,  and  was  refused. 
If  no  person  w^as  found  at  the  place  of  presentment  and 
protest,  or  no  one  was  found  upon  whom  proper  demand 
could  be  made,  the  protest  must  so  state.  If  anyone  was 
found  upon  whom  demand  was  made,  the  writing  must 
state  what  demand  was  made  and  what  answer,  if  any, 
was  given,  and  if  any  reason  was  given  for  the  refusal 
to  pay  or  accept  the  instrument  by  the  person  of  whom 
the  demand  was  made,  that  reason  must  be  stated  in  the 
protest.  If  the  protest  is  made  by  a  Notary  Public  he 
must  sign  it  in  his  official  capacity  and  attach  his  notarial 
seal.  If  it  is  made  by  a  person  other  than  a  Notary  a 
seal  is  not  required,  although  it  is  usual  to  attest  the 
solemnity  of  the  act  of  protest  by  making  upon  the 
paper,  at  his  signature,  a  scroll  seal,  this  being  a  circle 


242  THE  NEGOTIABLE  INSTRUMENTS  LAAV        §  154 

or  bracket  made  with  the  pen  within  which  tlie  word 
*'seal"  is  written.  If  the  instrument  which  is  to  be  pro- 
tested is  lost,  or  the  person  entitled  to  hold  it  cannot 
obtain  it  or  has  no  copy,  it  is  provided  in  Sec.  155  that 
the  protest  shall  contain  written  particulars  thereof. 
What  are  written  particulars  will  be  explained  under 
that  section. 

Protest:  by  "Sec.  154.     Protest  may  be  made  by: 

whom  made.  ^      j^  Notary  Public;  or 

2.  By  any  respectable  resident  of  the  place  where. 

THE  bill   is  dishonored,  IN   THE  PRESENCE  OF  TWO   OR  MORE 

credible  witnesses.  ' ' 

The  protest  may  be  and  usually  is  made  by  a  Notary 
Public  but  it  need  not  necessarily  be  made  by  a  Notary. 
Any  respectable  resident  of  the  place  where  the  bill  is 
dishonored  may  make  the  protest.  A  resident  is  a  per- 
son w4io  has  his  place  of  residence,  that  is,  one  who 
lives  at  the  place  where  the  instrument  is  dishonored, 
and  a  respectable  resident  is  one  who  is  in  good  stand- 
ing in  the  community  in  which  he  lives  and  who  enjoys  the 
respect  of  his  neighbors  and  associates.  The  protest  is 
a  personal  act  and  cannot  be  made  by  one  person  in 
another's  name,  unless  this  is  permitted  by  statute  or 
firmly  established  and  sanctioned  by  the  custom  of  a 
particular  place.^  If  protest  is  made  by  a  resident,  he 
must  make  it  and  sign  it  in  the  presence  of  two  credible 
witnesses  or  acknowledge  to  them  that  he  did  so.  Cred- 
ible witnesses  are  such  persons  whose  testimony  would 
be  accepted  or  whose  statement  of  any  fact  would  be 
believed  by  other  persons  in  the  community  in  which 
they  live,  and  who  are  generally  known  to  be  truthful 
persons.  It  is  not  necessary  that  they  accompany  the 
person  making  protest  when  he  presents  the  instrmnent 

3.  Coinmeroial  Bank  vs.  Varnum,  49  N.  Y.  269.  275. 
Ocean  Nafl  Bk.  vs.  ^Yil!iams,  102  Mass.  Ml. 


§  154  BILLS  OF  EXCHANGE,  PROTEST  243 

to  the  drawee  and  makes  demand,  their  presence  being 
required  only  at  the  execution  and  signing  of  the  protest 
by  the  person  making  it,  and  they  must  attest  the  protest 
as  witnesses.  One  w^ho  cannot  write  his  name  may  sign 
by  mark. 

AVhile  it  is  best  that  the  protest  be  made  by  a  disinter- 
ested person  the  Act  does  not  require  it  and  expressly 
provides  that  any  person  possessing  the  qualifications 
which  it  prescribes  may  make  it.  It  is  not  usual  that  any- 
one who  is  a  party  to  the  instrument  shall  make  the  pro- 
test but  if  it  is  done,  and  the  protesting  officer  possesses 
the  qualifications  of  this  section,  it  would  not  appear  to 
be  invalid  for  that  reason''  unless  made  so  by  other 
statute. 

There  is  always  considerable  uncertainty  and  con- 
fusion, though  there  need  not  be,  about  the  right  of  an 
officer  of  a  bank  to  legally  protest  paper  belonging  to 
his  bank  or  in  which  his  bank  is  interested.  In  the  ab- 
sence of  some  prohibitive  statute  or  regulation  in  the 
banking  laws  there  is  no  legal  objection  to  the  protest 
being  made  by  a  notary  who  is  also  a  bank  officer,^  even 
if  he  is  a  stockholder  in  the  bank,*''  and  it  has  been  held 
that  an  officer  of  a  bank  who  is  a  notary  may  protest 
his  own  note."    But  the  practice  is  not  recommended. 

The  protest  is  never  made  until  after  the  instrument 
has  been  dishonored  except  when  it  is  protested  for  bet- 
ter security  under  Section  158.  The  person  making  the 
protest  must  take  the  instrument,  if  it  has  not  been  lost, 
destroyed  or  wrongfully  detained,  to  the  party  who  is  to 

4.  Dyknian  vs.  Northbrid^e.  1  App.  Div.  26,  28,  36  N.  Y.  S.  962. 

5.  Nelson  vs.  First  Nat'l  Bk.,  69  Fed.  798,  29  U.  S.  App.  554. 

6.  Moreland's  Assignee  vs.  Citizen's  Svgs.  Bk.,  97  Ky.  211. 
Patton  vs.  Bk.  of  Lafayette,  124  Ga.  965,  53  S.  E.  664,  4  Ann. 

Cas.  639,  5  L.  R.  A.  N.  S.  592. 

7.  Dvknian  vs.  Northbridoe,  1  App.  Div.   (N.  Y.)   26,  36  N  Y.  S. 

"962. 


244  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  155 

pay  or  accept  it,  at  the  place  where  it  is  to  be  paid  or 
accepted,  even  if  it  has  already  been  presented  by  the 
holder  and  payment  or  acceptance  has  been  refused. 
Such  refusal  does  not  dispense  with  the  formality  of 
presentment  and  demand  by  the  protesting  officer  at  the 
place  where  protest  is  to  be  made,  except  as  it  is  pro- 
vided in  Section  156. 

Protest:  when  to  ''Sec.  155.  When  a  bill  is  protested, 
be  made.  such  peotest  must  be  made  ox  the  day 

of  its  dishonor,  unless  delay  is  excused  as  herein  pro- 
vided.    When  a  bill  has  been  duly  noted,  the  protest 

MAY  BE  subsequently  EXTENDED  AS  OF  THE  DAY  OF  THE 
NOTING.'" 

The  officer  must  protest  the  instrument  upon  the  very 
day  of  its  dishonor  unless  delay  is  excused  by  reason  of 
the  provisions  of  Section  159.  When  the  cause  of  the 
delay  no  longer  prevents  it  being  done,  the  protest  must 
be  made  with  reasonable  diligence.  The  same  degree  of 
diligence  is  required  as  is  ncessary  in  presenting  an  in- 
strument for  payment  (see  Sec.  81)  or  in  giving  notice  of 
dishonor.     (Sec.  113.) 

The  protest  usually  proceeds  in  two  steps.  After  pre- 
senting the  instrument,  which  has  already  been  dishon- 
ored, making  demand  and  after  failure  to  obtain  pay- 
ment, or  acceptance,  as  the  case  may  be,  the  person  pro- 
testing the  instrument  must  declare  that  he  does  protest 
the  instrument  and  must  write  upon  it,  and  in  his  regis- 
ter, a  memorandum  of  that  fact,  the  reasons  for  the 
protest,  the  month,  date  and  year  when  it  w^as  done,  the 
demand  made  and  the  answer  given,  and  such  other 
information  as  he  may  think  necessary  to  enable  him 
afterward  to  make  out  the  formal  protest,  and  sign  this 
memorandum  upon  the  instrument  either  by  name  or  by 
his  initials.  This  is  called  *' noting"  and  it  is  done  to 
serve  as  a  truthful  reminder  which  will  enable  the  person 


§  156  BILLS  OF  EXCHANGE,  PROTEST  245 

making  the  protest  to  later  make  out  his  formal  cer- 
tificate. Upon  this  being  done  the  protest  may  be  made 
at  any  subsequent  date,  even  after  action  has  been  begun 
on  the  instrument,  and  it  may  be  done  as  of  the  date  of 
the  noting.  This  is '* extending  the  protest."  When  the 
protest  is  extended  the  protesting  officer  will  issue  to  the 
holder  a  certificate  of  protest.  This  certificate  is  de- 
scribed in  Section  153.  Notice  of  dishonor  must,  of 
course,  be  given  upon  dishonor  of  the  instrument  in  the 
manner  and  at  the  time  required  by  Sections  89  to  118, 
inclusive,  and  if  the  notice  is  given  by  the  protesting 
officer  the  protest  usually  recites  that  such  notice  was 
given  and  to  whom.  It  is  customary,  too,  that  it  de- 
scribe the  manner  of  giving  the  notice  although  it  is  not 
necessary  that  the  certificate  recite  that  notice  was  given 
or  state  what  notice  was  given,  how,  or  to  whom,^  unless, 
as  I  have  already  stated,  and  now  repeat  for  emphasis, 
the  protest  is  relied  upon  exclusively  as  proof  that  a 
demand  was  made  and  all  necessary  steps  taken  in  order 
to  fix  the  liability  of  the  secondary  parties.^  Persons 
who  make  protest  of  negotiable  instruments  must  make 
themselves  familiar  with  the  provisions  of  Sub-division 
VII,  Title  I,  of  the  Act,  which  governs  the  manner  of 
giving  notice  of  dishonor. 

Protest:  where  "Sec.  156.     A  bill  must  be  protested 

made.  ^^  -jhe  place  where  it  is  dishonored,  ex- 

cept THAT  WHEN"  A  BILL  DRAWN  PAYABLE  AT  THE  PLACE  OF 
business,  or  residence  of  some  person  other  than  THE 
DRAWEE,  HAS  BEEN  DISHONORED  BY  NON-ACCEPTANCE,  IT  MUST 
BE  PROTESTED  FOR  NON-PAYMENT  AT  THE  PLACE  WHERE  IT  IS 
EXPRESSED  TO  BE  PAYABLE,  AND  NO  FURTHER  PRESENTMENT 
FOR  PAYMENT  TO,  OR  DEMAND  ON,  THE  DRAAVEE  IS  NECESSARY.^' 

8.  Martin  vs.  Brown,  75  Ala.  442. 

9.  Peoples  Bank  vs.  Brooke,  31  Md.  7. 
Mason  vs.  Kilcourse,  71  N.  J.  Law,  472. 


246  THE  NEGOTIABLE  INSTRUMENTS  LAW       §  157 

Demand  or  sight  bills,  or  a  bill  payable  at  a  fixed 
period  after  sight,  or  one  payable  at  a  designated  ma- 
turity are  often  made  payable  at  a  place  other  than  the 
residence  or  usual  place  of  business  of  the  drawee  and 
these  require  presentment  for  acceptance  before  being 
presented  for  payment.  (Sec.  143,  Sub-sec.  3.)  ''Place" 
as  used  in  this  section  may  be  understood  to  mean  any 
place  in  the  same  city,  town  or  business  community  other 
than  that  at  which  the  drawer  lives  or  where  he  conducts 
his  business  and  it  may  mean  another  city,  town  or  busi- 
ness community  other  than  that  one  in  which  he  lives 
or  does  business.  When  a  bill  is  so  drawn  it  requires 
presentment  for  acceptance  before  being  presented  for 
payment,  in  order  that  the  drawee  may  have  an  oppor- 
tunity to  examine  the  instrument  and  the  state  of  his 
accounts  with  the  drawer.  If  such  an  instrument  is  a 
foreign  bill  and  is  dishonored  by  non-acceptance  it  would 
seem  that  it  is  necessary  to  protest  it  upon  its  dishonor 
by  non-acceptance  (Sec.  152),  but  the  protest  must  be 
made  at  the  place  where  the  instrument  is  expressed 
to  be  payable.  Xo  further  demand  need  be  made 
upon  the  drawee,  whose  duty  it  seems  then  to  ])e,  since 
he  has  been  apprised  of  the  presence  of  the  instrument 
by  its  presentment  to  him  for  acceptance,  to  provide 
funds  with  which  to  pay  it  at  the  place  where  it  is  pay- 
able if  he  intends  to  do  so.^*^ 

Protest  both  for  ''^EC.  157.  A  bill  which  has  been 
non-acceptance  protested  for  non-acceptai^ce  may  be 
and  non-  subsequently     protested     for     non-pay- 

payment.  mext.  " 

AMiile  protest  upon  dishonor  of  the  instrument  by  non- 
payment after  it  has  already  been  protested  upon  non- 
acceptance,  need  not  be  made,  except  when  required  by 

10.     Mitchell  vs.  Barino-,  10  Barn  &  C.  4. 

Mason  vs.  Franklin,  3  Johns  (N.  Y.),  202. 


§  158  BILLS  OF  EXCHANGE,  PROTEST  247 

the  preceding  section,  it  may  be  done  if  desired,  and  if 
in  the  meantime  the  instrument  (a  foreign  bill)  has  been 
accepted,  it  must  be  done. 

If  notice  of  its  dishonor  by  non-acceptance  has  al- 
ready been  given,  notice  of  its  subsequent  dishonor  by 
non-payment  is  not  required  (Sec.  116)  and  no  further 
protest  need  be  made  in  order  to  charge  drawer  and  in- 
dorsers  unless  the  instrument  requiring  protest  has,  in 
the  meantime,  been  accepted  or  unless,  as  is  provided  in 
the  preceding  section,  the  bill  has  been  dishonored  by 
non-acceptance  at  the  drawee's  place  of  business  or  resi- 
dence, or  elsewhere,  and  it  is  payable  at  the  place  of 
business  or  residence  of  some  person  other  than  the 
drawee. 

Protest  before  "Sec.   158.     Where  the  acceptor  has 

maturity  where  been  adjudged  a  bankrupt  or  an  insolv- 
acceptor  is  ^^^^  ^^  -^^^  made  an  assignment  for  the 

BENEFIT  OF  CREDITORS,  BEFORE  THE  BILL,  MA- 
TURES, THE  HOLDER  MAY  CAUSE  THE  BILL  TO  BE  PROTESTED 
FOR  BETTER   SECURITY  AGAINST  THE  DRAWER  AND  INDORSERS.'^ 

When  a  bill  has  been  accepted  and  afterward,  before 
its  maturity,  the  acceptor  becomes  insolvent  or  a  bank- 
rupt or  if  he  has  made  an  assignment  for  the  benefit  of 
his  creditors  and  the  holder  has  reason  to  fear  that  the 
bill  will  not  be  paid  at  maturity,  he  may  protest  it  for 
better  securit}^ 

This  protest  does  not  hasten  the  maturity  of  the  bill 
or  dispense  with  its  protest  at  maturity  if  protest  is  then 
required  by  the  nature  of  the  instrument.  Its  ordinary 
effect  is  to  bring  about  an  acceptance  for  honor  and  it 
usually  prepares  the  way  for  such  an  acceptance.  The 
manner  in  which  such  an  acceptance  is  to  be  made  and 
the  formalities  which  attend  it  are  prescribed  and  de- 
scribed in  Sections  161  and  170.  This  protest  does  not 
give  the  holder  an  immediate  right  of  recourse  against 


248  THE  NEGOTIABLE  INSTRUMENTS  LAW  §159,160 

drawer  and  indorsers  as  upon  dishonor  and  he  cannot 
sue  them  upon  the  bill  before  its  maturity. 

When  protest  ' '  Sec.  159.     Protest  is  dispensed  with 

dispensed  with,  by  any  circumstances  which  would  dis- 
pense with  notice  of  dishonor.  Delay  in  noting  or 
protesting  is  excused  when  delay  is  caused  by  circum- 
stances BEYOND  THE  CONTROL  OF  THE  HOLDER  AND  NOT  IM- 
putable to  his  default,  misconduct  or  negligence, 
When  the  cause  of  delay  ceases  to  operate,  the  bill 

MUST  BE  noted  OR  PROTESTED  WITH  REASONABLE  DILIGENCE.'' 

The  circumstances  which  dispense  with  the  necessity 
of  giving  notice  of  dishonor  will  be  found  in  Sections 
109  to  118,  inclusive,  Title  I.  Protest  may  also  be  dis- 
pensed with  by  waiver.  (Sec.  111.)  The  provision  in 
this  section  regarding  delay  in  noting  or  protesting  is 
the  same  as  in  Section  113,  by  which  delaj"  is  excused  in 
giving  notice  of  the  dishonor  of  the  instrument  by  non- 
payment. After  the  cause  of  the  delay  has  been  removed, 
the  noting  must  be  done  or  the  protest  made  promptly. 

Protest  where  *'Sec.   160.     Where  a  bill  is  lost  or 

bill  is  lost.  destroyed  or  is  wrongly  detained  from 

the  person  entitled  to  hold  it,  protest  may  be  made  on 
a  copy  or  written  particulars  thereof." 

If  the  instrument  which  is  to  be  protested  is  lost  or 
destroyed  or  if  it  is  wrongfully  detained  from  the  per- 
son who  is  entitled  to  hold  it  at  the  time  when  protest 
must  be  made,  the  protest  may  be  made  upon  a  copy  of 
the  bill  if  one  can  be  obtained.  If  a  copy  cannot  be  pro- 
cured a  written  description  of  the  instrument  must  be 
drawn  up,  with  particulars  showing  its  date,  amount, 
w^hen  and  to  whom  payable,  the  names  of  the  drawer 
and  indorsers,  or  of  all  whose  names  can  be  obtained, 
and  all  endeavor  used  to  be  correct  and  exact  which  the 
particular  circumstances  wall  permit.  This  may  be  sub- 
stituted for  the  instrument  to  be  protested  if  the  instru- 
ment itself  cannot  be  produced  by  reason  of  its  loss, 


§  160  BILLS  OF  EXCHANGE,  PKOTEST  249 

destruction  or  wrongful  detention  from  the  holder  and 
the  protest  must  then  be  made  as  though  the  instrument 
were  actually  in  the  possession  of  the  holder.^^  The 
holder  must  himself  be  without  fault  in  his  failure  to 
produce  the  instrument  and  if  its  detention  is  not  wrong- 
ful, its  production  is  not  excused.  If  he  has  himself  de- 
liberately and  intentionally  destroyed  the  bill  he  cannot 
protest  on  written  particulars.  His  intentional  destruc- 
tion of  the  instrument  will  be  deemed  a  cancellation  and 
the  instrument  discharged.     (Sec.  119.) 

11.     Hinsdale  vs.  Miles,  5  Conn.  331. 


250  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  161 


SUBDIVISION   V. 


Acceptance  for  Honor. 


Section 

161  When  bill  may  be  accepted 

for  honor. 

162  Acceptance  for  honor;  how 

made. 

163  When  deemed  to  be  an  ac- 

ceptance    for     honor     of 
drawer. 

164  Liability     of     acceptor     for 

honor. 

165  Engagement  of  acceptor  for 

honor. 


Section 

166  Maturity     of    bill     payable 

after    sight    accepted    for 
honor. 

167  Protest  of  bill  accepted  for 

honor,  etc. 

168  Presentment  for  payment  to 

acceptor   for   honor;    how 
made. 

169  When  delay  in  making  pre- 

sentment is  excused. 

170  Dislionor    by    acceptor    for 

honor. 


When  bill  may  ''Sec.  161,  Where  a  bill  of  exchange 
be  accepted  for  has  been  protested  for  dishonor  by  non- 
^onoT.  acceptance  or  protested  for  better  se- 

curity, AND  IS  not  overdue,  ANY  PERSON  NOT  BEING  A  PARTY 
already  liable  thereon  MAY,  WITH  THE  CONSENT  OF  THE 
HOLDER,  INTERVENE  AND  ACCEPT  THE  BILL  SUpi'tt  PROTEST 
FOR  THE  HONOR  OF  ANY  PARTY  LIABLE  THEREON,  OR  FOR  THE 
HONOR  OF  THE  PERSON  FOR  WHOSE  ACCOUNT  THE  BILL  IS 
DRAWN.  The  acceptance  for  HONOR  MAY  BE  FOR  PART 
ONLY  OF  THE  SUM  FOR  WHICH  THE  BILL  IS  DRAWN  ;  AND 
WHERE  THERE  HAS  BEEN  AN  ACCEPTANCE  FOR  HONOR  FOR  ONE 
PARTY,  THERE  MAY  BE  A  FURTHER  ACCEPTANCE  BY  A  DIFFER- 
ENT PERSON    FOR   THE    HONOR  OF   ANOTHER  PARTY." 

'Wl\q\\  the  drawee  has  refused  to  accept  the  bill  as 
drawii,  any  person  not  already  a  party  liable  upon  it 
may  intervene  and,  with  the  consent  of  the  holder,  may 
at  any  time  before  maturity  accept  it  for  honor 
after  it  has  been  protested  for  non-acceptance  or  if, 
after  acceptance  by  the  drawee,  the  bill  is  protested 
before  maturity  for  better  security.  This  acceptance 
is  called  an  acceptance  "Supra  protest"  for  the 
reason  that  it  can  be  made  only  after  the  bill  has  been 
protested.    It  is  an  acceptance  by  a  person,  a  stranger, 


§161  BILLS  OF  EXCHANGE  251 

or  tlio  drawee,  if  he  is  not  already  a  party  liable  upon 
the  instrument,  made  in  order  to  save  the  credit  and  the 
honor  of  the  drawer  or  any  other  party  who  is  liable 
upon  the  bill,  or  of-  that  one  for  Avhose  account  it  has 
been  drawai.  The  drawee,  then,  if  he  is  unwilling  to 
accept  the  bill  generally  and  is  not  bound  in  good  faith 
to  do  so,  may  accept  it  for  honor  and  if  he  does,  his  ac- 
ceptance will  take  the  distinctive  character  of  this  pecu- 
liar and  very  unusual  kind.^  The  acceptance  for  honor 
may  be  made  only  with  the  consent  of  the  holder  and  if 
the  holder  permits  the  bill  to  be  accepted  for  honor  he 
has  then  the  right  to  enforce  it  against  the  acceptor  for 
honor  as  well  as  all  other  parties,  if  it  is  not  paid  at  ma- 
turity. He  must,  however,  properly  present  the  l)ill  to 
the  drawee  at  maturity  and  protest  it  again  if  the  drawee 
persists  in  his  determination  to  allow  the  bill  to  go  to 
dishonor  and  it  is  not  then  paid.  The  holder  cannot 
otherwise  require  the  acceptor  for  honor  to  pay  the  bill. 
(Sec.  167.) 

When  an  acceptance  for  honor  is  obtained  by  the 
holder  by  reason  of  its  protest  before  maturity  for 
better  security,  he  is  obliged  to  await  maturity  of  the 
bill  before  he  can  enforce  his  right  of  recourse  against 
the  acceptor  for  honor  and  those  parties  to  the  instru- 
ment for  whose  honor  it  was  accepted,  this  form  of  ac- 
ceptance creating  a  conditional  obligation  to  pay  the  bill 
only  if  the  drawee  does  not  pay  it  at  maturity.^ 

The  acceptance  for  honor  may  be  for  all  or  a  part  of 
the  sum  for  which  the  bill  is  drawn  and  there  may  be 
more  than  one  such  acceptance  for  one  or  more  than  one 
party. 

1.  Scliimmelpennicli  vs.  Bavard,  1  Pet.  (U.  S.)  264.  7  L.  Ed.  138. 
Swope  vs.  Ross,  40  Pa.  186.  80  Am.  D.  567. 

See  note  92  Am.  Dec.  579,  7  L.  R.  A.  209  Note. 

2.  Walton  vs.  Williams,  44  Ala.  347. 
Baring  vs.  Clark,  19  Pick  (Mass.)  220. 


252  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  162 

While  there  is  no  provision  in  the  Act  which  seems 
to  require  it,  it  is  the  dnty  of  the  acceptor  for  honor 
to  immediately  give  notice  of  the  fact  of  his  acceptance 
to    the    party    for    whose    honor    he    accepts    the    bill. 
If  he  fails  to  do  so  the  omission,  in  so  far  as  it  can  be  de- 
termined from  the  Act,  does  not  seem  to  affect  injur- 
iously his  right  to  recover  upon  the  bill  if  he  is  required 
to  pay  it  at  maturity.    But  it  has  been  considered  essen- 
tial to  his  right  of  recovery  if  he  pays  the  bill  that  he 
give    immediate    notice    of    his    intervention,    for    the 
reason  that  the  rights  of  other  parties  to  the  bill  are 
thereby  suspended  and  may  be  injuriously  affected  by  it.* 
AYhen  an  acceptance  for  honor  is  made  for  the  honor  of 
one  party  other  acceptances  may  be  subsequeiitly  made 
for  the  honor  of  other  parties  liable  upon  the  bill,  but  it 
seems  there  cannot  be  a  series  of  acceptances  of  separate 
parts  of  the  sum  for  the  honor  of  the  same  party.^    If 
any  acceptor  for  honor  is  required  to  pay  the  bill  his 
rights  are  as  fixed  by  Sections  175  and  177. 

Acceptances  for    "Sec.    162.      An   acceptance   for   honor 
honor:  how  supra  protest  must  be  in  writing,  and  in- 

made.  dicate    that    it    is    an    acceptance    for 

honor,  and  must  be  signed  by  the  acceptor  for  honor/ ^ 

Such  an  acceptance  must  be  in  writing.  It  is  usually 
made  upon  the  bill  and  the  words  generally  employed 
are  ''Accepted  Supra  Protest"  or  "Accepted  for  the 
honor  of , "  or  in  their  abbreviated  form  ' '  Ac- 
cepted S.  P. "  If  the  acceptance  does  not  expressly  state 
that  it  is  an  acceptance  for  honor  its  language  must  in- 
dicate that  it  is  and  any  of  the  above  forms  do  that  suffi- 
ciently. It  must  be  signed  by  the  acceptor  for  honor. 
By  the  law  of  agency  any  one  can  do  b^^  another  that 

3.  Wood  vs.  Pui?h,  7  Ohio  (Pt.  2)  156. 
Story  on  Bills,  Sec.  259. 

4.  Jackson  vs.  Hudson,  2  Camp.  (Eng.)  447. 


§  163,  164  BILLS  OF  EXCHANGE  253 

wliicli  lie  can  himself  do  and  an  acceptance  for  honor  by 
any  person  which  is  made  and  signed  by  his  agent,  duly 
authorized  for  that  purpose,  is  valid  and  enforceable. 

When  deemed  to  * '  Sec.    163.      Where    an    acceptance    for 

be  an  acceptanci  honor  does  not  expressly  state  for  whose 
for  honor  of  the 

drawer.  honor  it  is  made,  it  is  deemed  to  be  an  ac- 

ceptance FOR  the  honor  of  THE  DRAWER." 

If  the  acceptor  for  honor  does  not  expressly  state  in 
his  acceptance  for  whose  honor  he  accepts  the  bill  his 
acceptance  is  deemed  to  be  for  the  honor  of  the  drawer, 
and  in  the  absence  of  words  positively  and  clearly  stat- 
ing that  the  acceptance  for  honor  was  made  for  the 
honor  of  some  other  party  to  the  bill  this  cannot  be  shown 
even  if  it  be  a  fact,  upon  the  familiar  doctrine  that  a 
written  contract  cannot  be  varied  by  parol  proof.  It 
is  therefore  most  important  that  the  acceptor  for  honor 
state  clearly  for  whose  honor  he  accepts  the  instrument, 
for  his  liability  is  affected  thereby  as  will  appear  from. 
the  next  section,  and  if  his  acceptance  is  deemed  to  be  for 
the  honor  of  the  drawer  he  will  have  no  right  of  re- 
course against  the  indorsers  after  payment,  for  none  of 
these  are  liable  to  the  drawer.^ 

Liability  of  the  ' '  ^^^-  ^^'^-  ^^^  acceptor  for  honor  is 
acceptor  for  liable  to  the  holder  and  to  all  parties 

honor.  TO  the  bill  subsequent  to  the  party  for 

whose  honor  he  has  accepted." 

One  who  accepts  in  this  manner  is  liable  to  the  holder 

of  the  bill  to  whom  he  gives  the  acceptance,  of  course, 

and  he  is  liable  to  all  parties  after  that  party  for  whose 

honor  he  accepts  it.     It  is  apparent,  therefore,  that  if 

he  does  not  state  for  whose  honor  he  accepts  the  bill,  his 

liability  extends  to  all  parties  subsequent  to  the  drawer. 

5.     Gazzam  vs.  Armstrong,  3  Dana   (Ky.)   554,  557. 


254         THE  NEGOTIABLE  INSTRUMENTS  LAW  §165,166 

Engagement  of      ''Sec.    165.      The    acceptor    for    honor, 

acceptor  for  gy    such    acceptance    engages    that    he 

honor. 

WILL,  ON  DUE  presentment,  PAY  THE  BILL 
ACCORDING  TO  THE  TERMS  OF  HIS  ACCEPTANCE,  PROVIDED  IT 
SHALL  NOT  HAVE  BEEN  PAID  BY  THE  DRAWEE,  AND  PROVIDED 
ALSO,  THAT  IT  SHALL  HAVE  BEEN  DULY  PRESENTED  FOR  PAY- 
MENT AND  PROTESTED  FOR  NON-PAYMENT  AND  NOTICE  OF  DIS- 
HONOR GIVEN   TO  HIM." 

His  acceptance  like  any  other  is  in  the  nature  of  an 
agreement  that  he  will  pay  the  bill.  While  he  is  a  volun- 
tary party  to  the  instrument  and  may  himself  have  no 
interest  in  the  bill  or  its  proceeds,  he  is  bound  by  his 
agreement  and  must  pay,  but  only  after  the  holder  has 
duly  presented  the  bill  to  the  drawee  and  demanded  pay- 
ment and  thereupon  duly  protests  it  for  non-pa>anent  if 
the  drawee  does  not  then  pay  it.^  Ordinarily  when  a  bill 
has  been  dishonored  and  protested  for  non-acceptance 
and  due  notice  given  the  drawer  and  indorsers  they  are 
not  discharged  by  failure  to  protest  it  again  for  non- 
payment, or  by  a  failure  to  give  notice  of  dishonor  by 
non-payment.  But  in  this  respect  the  liability  of  an  ac- 
ceptor for  honor  and  his  rights  differ  from  theirs.  He 
will  be  discharged  if  the  holder  fails  to  protest  the  bill 
upon  dishonor  by  non-pa>anent  and  to  give  him  due  no- 
tice of  the  dishonor,  although  protest  had  already  been 
made  prior  to  his  acceptance  for  honor  and  notice  of  the 
dishonor  of  the  bill  by  non-acceptance  had  already  been 
given. 

Maturity  of  bill  "Sec.  166.  Where  a  bill  payable  after 
payable  after  sight  is  accepted  for  honor,  its  matur- 
sight,  accepted  jxy  is  calculated  from  the  date  of  the 
for  honor.  noting  for  non-acceptance  and  not  from 

the  date  of  the  acceptance  for  honor." 

A  bill  payable  after  sight  requires  presentment  for 
acceptance  to  fix  its  maturity.     (Sec.  143.)     When  such 

6.     Schofield  vs.  Bayard,  3  Wend.   (N.  Y.)  488. 
Lenox  vs.  Leverett,  10  Mass.  1,  6  Am.  Dec.  97. 


§167,168  BILLS  OF  EXCHANGE  255 

a  bill  is  dishonored  by  non-acceptance,  and  is  noted  or 
protested  and  notice  of  dishonor  is  given,  and  it  is  after- 
ward accepted  for  honor,  the  date  when  it  is  to  become 
due  is  calculated  from  and  determined  by  the  date  when 
noted  upon  its  dishonor  by  non-acceptance.  Its  due  date 
is  not  to  be  determined  or  affected  by  the  date  of  the  ac- 
ceptance for  honor.  The  act  of  ''noting"  the  protest  is 
defined  and  explained  in  Sec.  155. 

Protest  of  bill      "Sec.    167.      Where    a   dishonored    bill 

accepted  for  jj^g  been  accepted  for  honor  supra  pro- 

nonor,  etc.  '^ 

TEST  OR  CONTAINS  A  REFERENCE  IN  CASE  OF 
NEED,  IT  MUST  BE  PROTESTED  FOR  NON-PAYMENT  BEFORE  IT 
IS  PRESENTED  FOR  PAYMENT  TO  THE  ACCEPTOR  FOR  HONOR  OR 
REFEREE  IN  CASE  OF  NEED." 

While  it  is  provided  in  Section  152  that  bills  other 
than  those  appearing  upon  the  face  to  be  foreign  bills  do 
not  require  protest,  yet  certain  bills,  inland  or  foreign, 
whether  they  appear  upon  the  face  to  be  such  or  do  not 
so  appear,  must  be  protested  for  non-payment  under  cer- 
tain circumstances.  These  are  bills  which  have  been  pro- 
tested for  better  security  and  are  then  accepted  for  honor 
supra  protest  in  accordance  with  this  subdivision  and  a 
bill  which  contains  a  reference  in  case  of  need.  The  for- 
mer are  described  under  Section  158  and  the  latter  in  Sec- 
tions 161  and  165.  Such  bills  must  be  protested  upon  dis- 
honor by  non-payment  before  being  presented  for  pay- 
ment to  the  acceptor  for  honor  or  the  referee  in  case  of 
need  and  failure  to  do  so  will  release  the  acceptor  for 
honor  from  liability. 

Presentment  for  ''Sec    168.      Presentment   for   payment 

payment  to  to  the  acceptor  for  honor  must  be  made 

acceptor  for  as  follows: 

honor:   how  -^      j^,  j^  jg  ^^  ^j,  presented  in  the  place 

made. 

where  the  protest  for  non-payment  was 

made,  it  must  be  presented  not  later  than  the  day  fol- 
low^ing  its  maturity. 


256  THE  NEGOTIABLE  INSTRUMENTS  LAW        §168 

2.  IF  IT  IS  TO  BE  PRESENTED  IN  SOME  OTHER  PLACE  THAN 
THE  PLACE  WHERE  IT  WAS  PROTESTED,  THEN  IT  MUST  BE  FOR- 
WARDED WITHIN  THE  TIME  SPECIFIED  IN  SECTION  ONE  HUN- 
DRED  AND   FOUR." 

The  acceptor  for  honor  is  entitled  to  have  the  bill  pre- 
sented to  him  for  payment  and  presentment  must  be 
made  to  him  within  the  time  provided  in  this  section. 
If  the  bill  is  to  be  presented  to  him  in  the  place  where  it 
was  protested  for  non-payment  it  must  be  presented  not 
later  than  the  day  following  its  maturity.    "Place"  here 
means  city  or  village,  or  business  community  as  defined 
under  Section  103,  and  attention  is  directed  to  Section 
85  fixing  the  maturity  of  instruments  which  fall  due  on 
Saturday,  Sunday  or  any  holiday.    When  the  bill  is  not 
to  be  presented  to  the  acceptor  for  honor  in  the  place 
where  it  was  protested  it  must  be  forwarded  within  the 
time  provided  in  Section  104  for  giving  notice  of  dis- 
honor by  non-payment.     The  instrument  need  not  and 
should  not  be  forwarded  to  the  acceptor  for  honor  but 
should  be  sent  to  some  other  person  or  a  bank  at  that 
place,  and  that  person  or  bank  authorized  to  present 
the  bill  to  him  and  demand  its  payment.     The  present- 
ment must  be  made  at  the  place  named  in  the  bill,  if  a 
place  of  payment  is  specified,  or  at  the  usual  place  of 
business  or  residence  of  the  acceptor  for  honor  unless  a 
different  place  of  presentment  is  designated  in  his  accept- 
ance.    (See  Sec.  73.)    If  the  acceptor  for  honor  does  not 
pay  the  bill  the  instrument  must  again  be  protested  at  the 
place  where  it  is  presented  to  him  (Sec.  170)  and  notice  of 
its  non-payment  must  be  given  to  all  parties  who  are  to 
be  charged  upon  the  dishonored  instrument,  in  the  man- 
ner and  within  the  time  required  by  the  provisions  of 
Sections  89  to  118,  inclusive. 


§  169, 170  BILLS  OF  EXCHANGE  257 

When  delay  in  '*Sec.   169.      The   provisions   of   Section 

making  Eighty-one  apply  wheee  there  is  delay 

presentment  is  in  making  presentment  to  the  acceptor 

excused.  p^P  honor  or  referee  in  case  of  need." 

Any  of  the  circumstances  which  will  excuse  delay  in 
making  presentment  of  any  negotiable  instrument  for 
payment  as  provided  in  Section  81  will  excuse  delay  in 
making  presentment  for  pajTnent  to  the  acceptor  for 
honor  or  to  the  referee  in  case  of  need.  But  when  the 
causes  of  the  delay  no  longer  prevent  it  the  presentment 
must  be  made  with  the  same  degree  of  diligence  as  is  re- 
quired by  that  section  in  other  cases. 

Dishonor  of  bill  "Sec.   170.     When   the  bill  is  dishon- 

by  acceptor  for     ored  by  the  acceptor  for  honor  it  must 
honor.  , , 

be  protested  for  non-pay^ment  by  him. 

Upon  dishonor  of  the  bill  by  the  failure  or  refusal  of 
the  acceptor  for  honor  to  pay  it  when  called  upon  to 
do  so  at  its  presentment  in  accordance  with  Section  168, 
it  must  be  again  protested.  Thus,  such  a  bill  may  re- 
quire three  protests:  First,  upon  its  dishonor  for  non- 
acceptance  by  the  drawee,  next,  upon  dishonor  by  his 
non-payment,  and  lastly,  by  dishonor  by  non-payment 
by  the  acceptor  for  honor  if  he  fails  to  pay  the  bill  at  ma- 
turity, and  upon  each  protest  notice  of  dishonor  is  re- 
quired to  be  given  the  drawer  and  all  indorsers  who  are 
to  be  held  upon  the  instrument.  The  certificate  of  pro- 
test usually  states  that  notice  of  dishonor  was  duly  and 
properly  given  upon  dishonor  of  the  instrmnent  and 
when  it  does,  that  recital  is  prima  facie  evidence  that  it 
was  done.'  When  there  are  several  acceptors  for  honor 
either  of  the  whole  or  parts  of  the  sum  called  for  by 
the  bill,  it  would,  it  seems,  be  necessary  to  make  protest 
upon  the  dishonor  of  each. 

7.     Zollner  vs.  Moffitt,  222  Pa.  644,  72  A.  285. 


258:         THE  NEGOTIABLE  INSTRUMENTS  LAW        §  171 


SUBDIVISION  VI. 


Payment  for  Honor  Supra  Protest. 


Section 

171  Who  may  make  payment  for 

honor. 

172  Pa3'ment     for     honor;    how 

made. 

173  Declaration  before  payment 

for  honor. 

174  Preference  of  parties  offer- 

ing to  pay  for  honor. 


Section 

175  Effect  on  subsequent  parties 
where  bill  is  paid  for 
honor. 


176  Effect  of  refusal  of  holder 
to  receive  payment  for 
honor. 

177  Rights  of  paj^er  for  honor. 

The  general  rule  of  law  that  a  stranger  cannot  vol- 
untarily pay  the  debt  of  another  without  his  knowledge 
and  consent  and  acquire  the  right  of  re-imbursement,  is 
subject  to  the  exception  that  in  the  case  of  bills  of  ex- 
change, after  protest  for  non-payment,  any  person, 
whether  he  be  a  stranger  or  one  already  a  party  to  the 
bill,  may  intervene  and  pay  it  for  the  honor  of  some  other 
party.  The  payment  is  made  in  this  manner  when  it  is 
desired  to  protect  the  credit  of  the  bill  generally,  or  of 
the  particular  party  for  whose  honor  it  is  made.  Of 
course  the  obviously  easy  way  to  accomplish  the  same 
purpose  is  for  the  person  who  desires  to  take  up  the 
bill  to  take  it  by  transfer  from  the  holder.  There  are  no 
difficulties  in  the  way  of  accomplishing  this  if  the  bill 
is  one  payable  to  bearer  or  is  indorsed  in  blank  and  it  will 
not  then  require  the  indorsement  of  the  holder.  (Sec.  30.) 
If  it  requires  his  indorsement  he  may  transfer  the  bill 
without  himself  incurring  any  liability  upon  it  by  indors- 
ing without  recourse  (Sec.  38),  if  he  is  unwilling  to  add 
his  name  to  the  security  of  the  instrument.  If  ho  will 
not  consent  to  any  form  of  transfer,  the  payment  for 
honor  must  be  resorted  to.    The  exception  is  applicable 


§  171, 172  BILLS  OF  EXCHANGE  259 

only  to  bills  of  exchange  and  it  is  not  extended  even  to 
negotiable  notes. 

The  following  sections  prescribe  the  manner  in  which 
the  pajTnent  for  honor  must  be  made  and  the  rights  of  the 
payer  for  honor  and  the  liability  to  him  of  the  parties 
upon  the  instrument. 

Who  may  make     ''Sec.  171.     Where  a  bill  has  been  pko- 

payment  for         tested  for  non-payment,  any  person  may 
honor.  ' 

intervene  and  pay  it  supra  protest  for 

THE    honor    of    any    PERSON    LIABLE    THEREON    OR    FOR    THE 
HONOR  OF  THE  PERSON  FOR  WHOSE  ACCOUNT  IT  WAS  DRAWN.'* 

Payment  for  honor  may  be  made  by  any  person, 
whether  an  acceptor  for  honor  or  not,  or  whether  or  not 
he  is  already  a  party  to  the  bill,  after  the  bill  has  been 
protested  for  non-payment.  His  payment  is  called  a 
payment  "Supra  Protest,"  that  is,  he  pays  it  after  the 
protest,  for  the  honor  of  some  person  liable  upon  the 
bill,  or  for  the  one  for  whose  account  it  was  drawn.  He 
is  thereupon  entitled  to  receive  the  bill  as  is  provided  in 
Sec.  177.  If  it  is  made  in  strict  accordance  with  the  pro- 
vision of  this  subdivision  of  the  Act,  such  a  pajTuent  is 
not  deemed  to  be  a  voluntary  pajanent  made  by  a  third 
person,  a  stranger  (Sec.  172),  and  does  not  discharge 
the  instrument  when  it  is  made  in  the  manner  described 
in  the  next  section  although  made  by  a  party,  even  the 
drawee,  unless  the  bill  is  drawn  against  funds  of  the 
drawer  in  his  hands  and  he  is  bound  to  pay  it.^ 

Payment  for         ''Sec.     172.     The    payment    for     honor 
honor:  how  supra   protest   in   order   to   operate   as 

SUCH,  AND  not  AS  A  MERE  VOLUNTARY  PAY- 
MENT, MUST  BE  ATTESTED  BY  A  NOTARIAL  ACT  OF  HONOR 
WHICH  MAY  BE  APPENDED  TO  THE  PROTEST  OR  FORM  AN  EX- 
TENSION TO  IT. " 

1.     Konig  vs.  Bayard,  1  Pet.  (U.  S.)  250,  261,  7  L.  Ed.  132. 
Note  in  92  Am.  Dec.  579. 


260  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  172 

Considerable  formality  accompanies  a  pajment  for 
honor.  This  is  in  order  that  it  may  be  distinguished  from 
a  mere  voluntary  payment.  The  latter  discharges  the  bill 
as  upon  payment  by  a  primary  party,  while  a  payment 
for  honor  discharges  from  liability  only  certain  parties 
to  the  instrument  and  constitutes  the  payer  for  honor  a 
purchaser  of  the  bill  with  all  the  rights  of  the  holder  to 
whom  he  makes  the  payment  (Sec.  175).  It  must  there- 
fore be  attended  and  attested  by  a  notarial  act  of  honor 
which  must  be  executed  upon  or  attached  to  the  protest, 
or  so  identified  with  it  that  it  can  readily  be  perceived  to 
be  an  extension  of  it,  that  is,  following  after  and  conse- 
quent upon  the  protest.  The  notarial  act  of  honor  is  de- 
scribed in  the  next  section. 

Ordinarily  when  a  third  person  takes  up  the  instru- 
ment after  maturity  without  the  formality  incident  to  a 
payment  for  honor,  his  act  is  presumed  to  be  a  purchase 
rather  than  a  payment. ^  A\niether  it  is  to  be  so  regarded, 
how^ever,  will  depend  upon  the  intention  of  the  parties, 
and  this  is  to  be  determined  from  the  acts  and  declara- 
tions of  the  parties  themselves  and  the  circumstances 
surrounding  the  transaction.^ 

Whatever  inconveniences  and  difficulties  such  a  payer 
may  encounter  when  he  comes  to  recover  his  outlay  upon 
the  bill  can  all  be  avoided  if  he  will  declare  his  intention 
to  pay  for  honor  and  execute  it  in  accordance  with  the 
requirements  of  this  subdivision. 

2.  Johnson  vs.  Schnabaum,  86  Ark.  82,  86,  109  S.  W.  1163. 
Mfrs.  Natl  Bk.  vs.  Thompson,  129  Mass.  438,  37  Am.  R.  376. 
Irving  Bk.  vs.  Wrtherald,  36  N.  Y.  335. 

Cantrel  vs.  Davidson.  180  Mo.  A.  410,  168  S.  W.  271. 

3.  Wood  vs.  Guarantee  Tr.  Co.,  128  U.  S.  416,  32  L.  Ed.  472. 
Prather  vs.  HairgTove,  214  Mo.  142,  112  S.  W.  552. 

People's  Bk.  vs.  Craig,  63  Oh.  St.  374,  59  N.  E.  102,  81  Am. 
S.  R.  639,  52  L.  R.  A.  872. 


§  IT.S,  174  BILLS  OF  EXCHANGE  261 

Declaration  "8ec.  173.     The  notarial  act  of  honor 

before  payment    -^jj^rj^  jgE  founded  on  a  declaration  made 
for  honor. 

BY  THE  PAYER  FOR  HONOR  OR  BY'  HIS  AGENT 
IN  THAT  BEHALF  DECLARING  HIS  INTENTION  TO  PAY  THE  BILL 
FOR  HONOR  AND  FOR  WHOSE  HONOR  HE  PAYS." 

The  notarial  act  to  be  written  upon  the  protest  or  ap- 
pended to  it,  or  which  must  be  identified  with  it,  must 
contain  a  statement  that  the  payer  for  honor  or  his  agent, 
who  is  authorized  to  act  for  him  in  that  particular  mat- 
ter and  for  that  purpose,  has  declared  his  intention  to 
pay  the  bill  for  honor.  It  must  also  state  for  whose 
honor  the  jjayment  is  made.  It  does  not  require  the  sig- 
nature of  the  payer  for  honor  or  his  agent,  it  being  suf- 
ficient that  he  or  his  agent  declare  his  intention  to  the 
notary  who  thereupon,  over  his  own  signature  and  seal, 
writes  out  the  declaration  of  honor.  He  then  makes  a 
record  of  the  declaration  in  the  protest,  or  appends  it 
to  the  protest,  or  having  already  written  out  the  pro- 
test, writes  out  a  separate  declaration  for  honor  and 
identifies  it  with  the  protest  by  reference  to  it,  thus  com- 
pleting the  notarial  act  of  honor. 

Preference  of  ''Seo.  174.  Where  two  or  more  persons 
parties  offering  offer  to  pay  a  bill  for,  the  honor  of  dif- 
to  pay  for  honor,  j^gjjg^^rj,  parties,  the  person  whose  pay- 
ment WILL  discharge  MOST  PARTIES  TO  THE  BILL  IS  TO  BE 
GIVEN    THE    PREFERENCE." 

This  section  does  not  seem  to  require  exx3laiiation. 
No  very  good  reason  can  be  conceived  why  a  holder 
should  want  to  prefer  one  offer  to  pay  for  honor  over  an- 
other and  he  is  directed  by  this  section  to  accept  that  one 
-which  will  discharge  the  most  parties  to  the  bill.  It  is 
within  the  possibilities,  of  course,  that  the  holder  might 
fail  to  give  preference  to  that  offer  which  would  dis- 
charge the  most  parties  and  in  that  case  it  is  also  quite 
possible  that  complications  will  arise.  The  payer  for 
honor  whose  payment  he  accepts  will  receive  the  bill  and 


262  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  175 

be  subrogated  for  and  succeed  to  all  the  rights  and  du- 
ties of  the  holder.  (Next  section.)  Perhaps,  in  view 
of  Section  120,  Sub-section  4,  Title  I,  wherein  it  is  pro- 
vided that  secondary  parties  are  discharged  by  a  valid 
tender  of  payment  made  by  a  prior  party,  those  par- 
ties will  be  discharged  who  stand  between  that  one  on 
whose  behalf  a  tender  was  made  and  the  one  on  whose 
behalf  the  offer  to  pay  for  honor  was  accepted.  Perhaps 
Section  176  may  be  regarded  as  adding  cumulative  force 
to  the  suggestion  that  they  might  be,  for  you  will  ob- 
serve it  provides  that  the  holder  loses  his  right  of  re- 
covery against  any  party  who  Avould  have  been  dis- 
charged by  such  payment.  If  the  holder  lost  this  right 
by  his  failure  to  accept  the  tendered  payment  he  can- 
not transmit  it  to  the  payer  for  honor  whose  payment 
for  honor  he  accepts.  I  am  not  aware  that  this  question 
has  ever  been  raised  or  decided  and  there  seems  to  be 
little  probability  that  it  ever  will  be,  if  the  holder  is 
acquainted  with  his  duty  to  give  preference  to  that  offer 
to  pay  for  honor  which  will  discharge  the  most  parties 
liable  upon  the  instrument  and  of  the  penalty  prescribed 
by  Section  176  for  his  failure  to  do  so. 

*'Sec.  175.     Wheee  a  bill  has  been  paid 
subsequent  FOR  HONOR,  all  parties  subsequent  to  the 

parties  where  party  for  whose  honor  it  is  paid  are 
bill  is  paid  for  discharged,  but  the  payer  for  honor  is 
lionor.  subrogated  for,   and   succeeds   to,   both 

the  rights  and  duties  of  the  holder  as  regards  the 
party  for  whose  honor  he  pays  and  all  parties  liable 
to  the  latter." 

Upon  payment  for  honor  having  been  made  all  par- 
ties whose  liability  upon  the  bill  is  subsequent  to  that 
one  for  whose  honor  the  payment  Avas  made,  are  dis- 
charged. The  payer  for  honor  is  regarded  as  a  pur- 
chaser of  the  bill  who  takes  it  as  by  indorsement  from 
the  holder  and  is  invested  with  all  his  rights  as  against 


§  176  BILLS  OF  EXCHANGE  263 

the  person  for  whose  honor  the  payment  was  made  and 
all  parties  liable  to  that  person.  If  the  holder  is  a  holder 
in  due  course,  the  payer  for  honor  becomes  so  notwith- 
standing the  fact  that  he  acquires  the  bill  after  matur- 
ity (Sec.  58).  He  is  also  charged  with  all  the  duties  of 
the  holder  and  is  obliged  to  take  all  steps  required  of  the 
holder  in  order  to  charge  the  party  for  whose  honor  the 
instrument  is  paid  and  to  charge  all  other  parties  liable 
to  such  person.  He  is,  therefore,  not  excused  from  giv- 
ing notice  of  dishonor  if  none  had  been  given  by  the 
holder  previous  to  his  payment  for  honor*  and,  in  some 
States,  it  has  been  held  that  he  must  himself,  within  a 
reasonable  time,  give  notice  of  his  payment  for  honor 
or  cause  it  to  be  given. ^ 

.     .  "Sec.  176.     Where  the  holder  of  a  bill 

of  holder  to  ^^     REFUSES    TO    RECEIVE    PAYMENT    Slipra    PRO- 

receive  payment  test,  he  loses  his  right  of  recourse 
for  honor.  against  any  party  who  would  have  been 

DISCHARGED   BY    SUCH    PAYMENT." 

The  section  above  states  the  law  in  such  obviously 
plain  language  that  no  explanation  is  necessary.  It  is 
difficult  to  conceive  of  any  reason  w^hy  a  holder  should 
refuse  payment  when  it  is  offered  to  him  but  if  he  does, 
the  section  declares  that  he  cannot  recover  from  any 
party  who  would  have  been  discharged  by  the  payment. 
The  offer  must,  of  course,  be  accompanied  by  a  valid  ten- 
der, and  what  is  considered  to  be  such  a  tender  is  defined 
in  Section  120.    See  observations  under  Section  174. 

Rights  of  payer  "Sec.  177.  The  payer  for  honor,  on 
for  honor.  paying  to  the  holder  the  amount  of  the 

BILL  AND  THE  NOTARIAL  EXPENSES  INCIDENTAL  TO  ITS  DIS- 
HONOR, IS  ENTITLED  TO  RECEIVE  BOTH  THE  BILL  ITSELF  AND 
THE  PROTEST. ' ' 


4.  Lenox  vs.  Leverett,  10  Mass.  1,  6  Am.  Dec.  97. 

5.  Wood  vs.  Pugh,  7  Ohio  (Part  2)  501. 
Gazzam  vs.  Armstrong,  3  Dana  (Ky.)  554. 


264  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  177 

The  payer  for  honor  must  pay  the  amount  due  upon 
the  bill,  including  interest  if  it  is  so  payable.  If  it  is  not 
payable  with  interest  and  is  not  expressly  payable  with- 
out interest,  he  will  be  required  to  pay  interest  from  the 
date  of  maturity  to  the  date  of  his  pajTnent.  In  addition 
thereto  he  must  pay  all  notarial  expenses  caused  by  the 
dishonor  and  protest.  Upon  doing  this  the  bill  and  pro- 
test must  be  given  to  him.  He  then  has  the  right  to  en- 
force it  against  the  party  for  whose  honor  he  paid  it  and 
against  all  parties  who  are  liable  to  that  one. 


§  178  BILLS  IN  A  SET  265 


SUBDIVISION  VII, 


Bills  in  a  Set. 

Section  Section 

178  Bills  in  sets  constitute  one   igl     Acceptance   of   bills   drawn 

.  in  sets. 

179  Rights  of  holders  where  dif- 

ferent    parts     are     nego-    182     Payment     by     acceptor     of 
tiated.  bills  drawn  in  sets. 

180  Liability  of  holder  who  in-    ^^o     t7i«-    2.    ^  j-     -u       •  j: 

-,       -^  .  .     183    Effect  of  discharginiT  one  of 

dorses  two  or  more  parts  °    ^ 

of  a  set  to  different  per-  ^  set. 

sons. 

Bills  in  a  set  are  such  of  which  an  original  and  one  or 
more  duplicate  parts  are  drawn  and  issued  at  the  same 
time.  Their  most  common  use  is  in  the  form  of  foreign 
exchange  issued  in  or  upon  foreign  countries.  Such  bills, 
of  no  matter  how  many  parts  they  may  consist,  consti- 
tute but  one  bill  when  each  part  contains  a  reference  to 
the  other  part  or  parts  and  each  is  separately  numbered. 
They  are  usually  drawn  in  three  and  sometimes  as  many 
as  four  parts.  The  separate  numbering  and  reference  to 
the  other  parts  contained  in  each  is,  of  course,  intended 
to  be  and  operates  as  a  notice  to  every  party  and  to  the 
drawee,  that  the  bill  has  been  issued  in  several  parts.  A 
foreign  bill  is  so  issued  in  order  to  avoid  delay  and  in- 
convenience which  may  result  from  the  loss  or  miscar- 
riage of  the  bill  and  to  facilitate  its  transmission  for  ac- 
ceptance or  payment,  and  to  accomplish  this  the  separate 
parts  are  usually  sent  by  different  means  or  at  different 
times,  or  one  part  sent  directly  to  the  drawee  for  ac- 
ceptance and  the  others  negotiated.^ 

1.     Byles  on  Bills.  387. 

Caras  vs.  Thalmann,  138  App.  Div.  (N.  Y.)  297. 


266  THE  NEGOTIABLE  INSTEUMENTS  LAW  §178,179 

Bills  in  sets  ''Sec.  178.     Where  a  bill  is  drawn  in  a 

constitute  one        g^^    each   part   of   the   set   being   num- 
bill. 

BERED  AND  CONTAINING  A  REFERENCE  TO  THE 
OTHER  PARTS,  THE  WHOLE  OF  THE  PARTS  CONSTITUTES  ONE 
BILL. ' ' 

A  bill  issued  and  marked  as  is  provided  in  this  section 

is  notice  to  every  person  that  its  parts,  other  than  that 

one  exhibited  to  him,  exist,  and  when  more  than  one  part 

of  a  bill  drawn  in  a  set  is  negotiated  the  holders'  rights 

and  the  liability  of  one  who  indorses  tw^o  or  more  parts  to 

different  persons,  and  their  manner  of  acceptance  and 

payment  are  provided  for  in  the  five  succeeding  sections. 

Rights  of  ' '  Sec.  179.     Where  two  or  more  parts  of 

holders  where  a  set  are  negotiated  to  different  hold- 

different  parts  ^^^    ^^    p^,^,    bourse,    the    holder    whose 

are  negotiated.  ' 

TITLE  FIRST  ACCRUES  IS  AS  BETWEEN  SUCH 
holders  THE  TRUE  OWNER  OF  THE  BILL.  BUT  NOTHING  IN 
THIS  SECTION  AFFECTS  THE  RIGHTS  OF  A  PERSON  WHO,  IN  DUE 
COURSE,  ACCEPTS  OR  PAYS  THE  PART  FIRST  PRESENTED  TO 
HIM." 

The  bill  is  issued  in  parts  only  in  order  to  avoid  delay 
and  inconvenience  which  may  result  from  the  miscar- 
riage or  loss  of  the  bill  and  it  is  not  expected  that  its 
parts  will  be  separately  negotiated.  They  separate  only 
when  they  are  forwarded  for  acceptance  or  payment.  If 
they  should  be  separately  negotiated,  however,  it  be- 
comes necessarj^  to  determine  who  is  the  owner  of  the 
bill. 

A  holder  who  is  not  a  "holder  in  due  course"  yet  holds 
one  part  of  the  bill,  would  not  be  the  owner  of  the  bill  as 
against  one  in  possession  of  another  part  who  is  a  holder 
in  due  course.  (As  to  who  is  a  holder  in  due  course  see 
Section  52.)  But  two  or  more  persons  may  each  be  a 
holder  in  due  course  of  a  separate  part  of  the  bill,  and 
it  then  becomes  necessary  to  determine  who  is  the  true 
owner  of  the  bill.  In  that  case,  that  one  whose  title  first 
accrues  is  the  real  owner.     His  title  "accrues"  at  the 


§  180  BILLS  IN  A  SET  267 

time  he  becomes  the  owner  with  the  qualifications  re- 
quired by  Section  52  of  the  part  of  the  bill  which  he  holds 
and  therefore,  and  at  that  time,  he  becomes  entitled  to  all 
the  other  parts  of  the  bill. 

Anyone  taking  less  than  the  whole  number  of  parts 
of  the  bill,  being  advised  that  other  parts  exist,  does  so 
at  his  own  peril.^  But  if  the  person  upon  whom  the  bill 
is  drawn  accepts  or  pays  in  good  faith  in  due  course 
any  other  part  of  the  bill  which  is  presented  to  him,  be- 
fore the  presentment  of  that  part  held  by  another  per- 
son whose  title  has  first  accrued,  his  rights  are  not  af- 
fected by  this  section.  He  cannot  be  required  to  accept 
or  pay  any  other  part,  although  the  right  of  some  person 
other  than  the  one  whose  part  of  the  bill  is  accepted  or 
paid  has  first  accrued.  Payment  in  ''due  course"  re- 
member, requires  that  he  have  no  notice  that  a  prior  right 
to  payment  has  accrued  to  some  one  other  than  the  one 
whose  part  of  the  bill  he  has  accepted  or  paid.  The  term 
is  defined  in  Section  88. 

.  "Sec.  180.     Where  the  holder  of  a  set 

holder  who  indorses  two  or  more  parts  to  different 

indorses  two  or  persons  he  is  liable  on  every  such  part, 
more  parts  of  a  and  every  indorser  subsequent  to  him  is 
set  to  different  li^bl^  on  the  part  he  has  himself  in- 
persons.  dorsed,  as  if  such  parts  were  separate 

bills." 

A  holder  of  a  set  of  bills,  however,  w^ho  indorses  two  or 
more  parts  to  different  persons  is  liable  upon  all.  And 
each  indorser  is  liable  upon  that  part  which  he  has  in- 
dorsed. Since  only  one  part  of  a  bill  drawn  in  a  set  will 
be  accepted,  and  paid,  all  other  parts  which  have  been 
separately  negotiated  will  return  to  and  must  be  taken  up 
by  that  holder  who  negotiated  them  separately.    The  in- 

2.     Lans  vs.  Smith,  7  Bing.  284,  294. 

Holdsworth  vs.  Hunter,  10  C.  B.   (Eng.)  449. 
Byles  on  Bills,  389. 


268  THE  NEGOTIABLE  INSTRUMENTS  LAW  §181,182 

dorsers'  liability  is  the  same  as  though  the  parts  were 
separate  bills.  The  parts  of  a  bill  which  are  dishonored 
by  non-acceptance  or  non-payment  must  be  proceeded 
upon  by  the  holder^,  that  is,  notice  of  dishonor  must  be 
given  or  they  must  be  protested,  if  protest  is  required, 
in  the  same  manner  as  though  they  were  separate  bills. 
Acceptance  of  "Sec.  181.  The  acceptance  may,  be 
bills  drawn  in  written  on  any  pabt  and  it  must  be  wkit- 
^®*^'  ten  on  one  part  only.     If  the  drawee 

accepts  more  than  one  part,  and  such  accepted  parts 
are  negotiated  to  different  holders  in  due  course,  he 
IS  liable  on  every  such  part  as  if  it  were  a  separate 

BILL. ' ' 

Any  part,  but  only  one,  of  the  set  of  bills  may  be  ac- 
cepted or  paid.  If  the  holder  should  present  more  than 
one  part  of  the  bill  to  the  drawee,  and  he  usually  presents 
them  all,  or  if  more  than  one  part  is  presented  by  sepa- 
rate holders  and  the  drawee  accepts  more  than  one,  he 
will,  however,  be  liable  upon  each  acceptance  to  its 
holder  and  if  the  accepted  parts  are  negotiated  to  differ- 
ent holders  in  due  course,  the  acceptor  is  liable  upon  each 
even  if  the  acceptances  were  all  given  to  the  holder  who 
presented  the  several  parts  of  the  bill.  The  acceptor's 
liability  is  to  each  holder  in  due  course  upon  the  ac- 
cepted part  which  he  holds,  and  it  is  the  same  as  if  each 
were  a  separate  bill.  Upon  presentment  of  the  separate 
parts  to  the  drawee  it  is  proper  for  him  to  take  up  and 
retain  all  but  that  part  upon  which  he  places  his  accept- 
ance. This  he  returns  to  the  holder. 
Payment  by  "Sec.   182.     When    the    acceptor    of    a 

acceptor  of  bills  ^jll  drawn  IN  a  SET  PAYS  IT  WITHOUT  BE- 
in  sets.  quiring  the  part  bearing  his  acceptance 

TO  be  delivered  up  to  him,  and  that  part  at  maturity  is 
outstanding  in  the  hands  of  a  holder  in  due  course, 
he  is  liable  to  the  holder  thereon.  ' ' 


3.     Downes  &  Co.  vs.  Church,  13  Peters  (U.  S.)  205. 
Walsh  vs.  Blatchford,  6  Wis.  422.  425. 


§  183  BILLS  IX  A  SET  269 

Upon  paying-  a  bill  drawn  in  a  set  the  acceptor  must  re- 
quire that  part  of  the  bill  which  bears  his  acceptance  to 
be  surrendered  to  him.  If  he  neglects  to  do  so  and  it  is  or 
has  been  negotiated  and  at  its  maturity  is  still  outstand- 
ing against  him,  he  is  liable  to  a  holder  in  due  course 
upon  such  outstanding  part  bearing  his  acceptance  and 
must  pay  that  also  notwithstanding  his  payment  of  any 
other  part  of  the  bill. 

'*Sec.  183.     Except  as  herein^  otherwise 
Effect  of  provided,  where  any  one  part  of  a  bill 

discharging  one    drawn  IN  A  SET  IS  discharged  by  payment 

of  a  set.  Qj^    otherwise,    the    whole    bill    is    dis- 

"Wisconsm.  , ,  ' 

CHARGED. ' ' 

Pa^Tuont  of  one  part,  or  the  discharge  in  any  other 
manner  (as  provided  in  Sections  119  to  125)  of  one  part 
of  the  bill,  discharges  the  wdiole  set.^  This  is  not  so,  how- 
ever, when,  as  provided  in  the  preceding  section,  the  part 
of  the  set  bearing  his  acceptance  is  not  delivered  to  the 
acceptor,  but  has  been  negotiated  and  remains  outstand- 
ing in  the  hands  of  a  holder  in  due  course.  (See  Section 
182.) 

4.     Caras  vs.  Thalmaun,  13S  App.  Div.  (N.  Y.)  297. 


270  THE  NEGOTIABLE  INSTRUMENTS  LAW        .^  184 


TITLE    III, 


Promissory  Notes  and  Checks. 
Forms  and  Interpretation. 


Section 

184  Promissory     note     defined; 

certificates     of     deposit ; 
bonds  and  their  coupons. 

185  A  cheek  defined. 

186  Within   what   time   a   check 

must  be  presented :.  memo- 
randum check. 

187  Certification    of    check;    ef- 

fect of. 


Section  • 

188  Effect  where  holder  of  check 
procures  it  to  be  certified. 

189  When  check  operates  as  an 
assignment. 

Statement  of  the  duties  and 
liabilities  of  banks  and 
other  agents  in  the  col- 
lection of  commercial  pa- 
per.    Page  280. 

In  this  brief  title,  after  defining  a  promissory  note, 
the  distinction  between  a  check  and  an  ordinary  bill  is 
pointed  out.  This  distinction  exists  principally  in  the 
consequences  which  follow  upon,  and  the  legal  etfect  of 
the  failure  of  the  holder  to  present  the  check  for  payment 
within  a  reasonable  time  after  its  issue,  of  his  failure  to 
give  the  drawer  notice  of  its  dishonor  and  of  its  certifica- 
tion when  procured  by  the  holder,  but  another  distinctive 
characteristic  of  a  bank  check  is  that  it  is  always  sup- 
posed to  be  drawn  upon  a  fund  which  exists  at  its  date  to 
the  credit  of  the  drawer.  The  drawer  is  regarded  some- 
what the  same  as  a  maker  of  a  promissory  note,  that  is,  he 
is,  from  the  inception  of  the  check,  the  principal  debtor, 
and  while  prompt  presentment  for  payment  after  its 
issue  or  last  negotiation  is  required  to  charge  indorsers 
upon  a  check,  the  failure  of  the  holder  to  present  the 
check  for  pa}^nent  within  a  reasonable  time  after  its  is- 
sue and  notify  the  drawer  of  its  dishonor  if  it  is  not  paid 
by  the  bank  upon  which  it  is  drawn,  will  release  him  only 
if  he  has  suffered  a  loss  through  its  extended  negotia- 
tion or  through  a  delay  or  neglect  of  the  holder  to  pre- 


§184  PKOMISSORY  NOTES  AND  CHECKS  271 

sent  it  promptly  for  payment.  The  loss  contemplated 
is  a  loss  which  may  occur  by  the  failure  of  the  bank 
upon  which  the  check  is  drawn,  a  risk  which  the  law  im- 
poses upon  the  drawer  for  a  reasonable  length  of  time 
after  its  issue.  After  a  reasonable  time,  however,  his 
risk  terminates  and  is  transferred  to  the  holder.  At 
another  place  (Section  186)  something  will  be  said  about 
the  degree  of  diligence  required  of  the  holder  and  about 
the  effect  of  the  certification  of  the  check  w^hen  procured 
by  the  holder.     (Sec.  188.) 

Promissory  note  ''Sec.  184.  A  negotiable  promissory  note 
denned. 

WITHIN  THE  MEANING  OF  THIS  ACT  IS  AN 
unconditional,  promise  in  WRITING  MADE  BY  ONE  PERSON 
TO  ANOTHER,  SIGNED  BY  THE  MAKER  ENGAGING  TO  PAY  ON  DE- 
MAND, OR  AT  A  FIXED  OR  DETERMINABLE  FUTURE  TIME,  A  SUM 
CERTAIN  IN  MONEY  TO  ORDER  OR  TO  BEARER.  WhERE  A  NOTE 
IS  DRAWN  TO  THE  MAKER 's  OWN  ORDER,  IT  IS  NOT  COMPLETE 
UNTIL  INDORSED  BY  HIM." 

As  has  already  been  stated  in  the  introduction  to  the 
first  Title  and  at  Section  3  in  that  Title,  not  all  promis- 
sory notes  are  negotiable  and  a  written  promise  to  pay 
money  may  be  regarded  as  a  promissory  note  although 
it  is  not  negotiable.  Its  interpretation  and  enforcement, 
however,  are  not  governed  by  this  Act  if  it  is  not  a  ne- 
gotiable instrument.  This  section  contains  the  definition 
of  a  ''negotiable  promissory  note"  and  as  it  will  be  seen 
by  reference  to  Section  1  of  Title  I,  the  definition  in- 
corporates all  of  the  requirements  of  such  an  instru- 
ment in  order  to  constitute  it  a  negotiable  promissory 
note.  That  section  and  its  explanations  are  referred  to 
without  further  observation.  By  Section  30  the  nego- 
tiation of  an  instrument  payable  to  order  is  accomplished 
by  its  indorsement  and  delivery  by  the  holder  to  his 
transferee.  This  section  is  related  to  Section  30  and  to 
Sections  15  and  16  in  that  it  provides  that  a  promissory 
note,  when  payable  to  the  maker's  own  order,  is  incom- 


272  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  184 

plete  until  it  is  indorsed  by  him.  When  such  an  instru- 
ment is  negotiated  without  the  indorsement  of  the  maker 
it  will  not  bind  him  unless  the  transfer  was  made  under 
such  circumstances  as  will  entitle  the  holder  by  reason 
of  the  provisions  of  Section  49,  to  require  him  to  in- 
dorse it. 

You  will  find  no  special  provision  in  the  Act  upon  the 
subject  of  certificates  of  deposits  or  Bonds  and  their 
Coupons.  These  two  forms  of  negotiable  instrmnents 
are  in  effect  and  in  fact  promissory  notes. ^ 
Certificates  of  The  first,  a  Certificate  of  Deposit,  is  the 
deposit.  w^ritten  acknowledgment  of  a  bank  that 

it  has  received  from  the  person  to  whom  it  is  issued  the 
sum  of  money  it  mentions,  and  it  contains  the  promise 
of  the  bank  to  repay  the  amount  upon  demand  or  at  a 
future  specified  date  upon  surrender  of  the  certifica:te. 
Therefore  it  contains  all  the  elements  of,  and  is  in  fact, 
the  promissory  note  of  a  bank.^  It  is  fully  negotiable 
if  it  contains  words  of  negotiability  and  otherwise  meets 
the  requirements  of  the  first  Title  of  the  Act  (Sections 
1  to  23). 

The  only  important  distinction  between  a  certificate  of 
deposit  and  a  promissory  note  may  be  said  to  lie  in  the 
fact  that,  by  judicial  interpretation  of  the  rules  of  the 
Law  Merchant,  (which  are  yet  applicable  in  the  absence 
of  express  provision  in  this  Act  to  the  contrary)  demand 
for  payiuent  is  necessary  before  action  to  recover  from 

1.  Forest  vs.  Safety  Bks:.  &  Tr.  Co.,  174  Fed.  345. 
Jensen  vs.  Wilself,  36  Nev.  37. 

Curran  vs.  Witter,  68  Wis.  16. 
Maxwell  vs.  Agnew,  21  Fla.  154. 

Blackman  vs.   Lehman,   Durr  &   Co.,  63  Ala.   547,   35   Am.   R. 
57,  also  see  Note  4. 

2.  Pierce  vs.  State  Nat'l  Bk.,  215  Mass.  18. 

Citizens  Nat'l  Bk.  vs.  Brown,  45  Oh.  St.  39,  11  N.  E.  799,  4 

A.  S.  R.  526. 
Brummagin  vs.  Tallant,  29  Calif.  503,  89  Am.  Dec.  61. 


§  184  PROMISSORY  NOTES  AND  CHECKS  273 

the  maker  of  the  certificate.^  The  decisions  are  by  no 
means  uniform  to  this  effect,  but  those  so  holding  are  re- 
garded as  based  upon  the  sounder  principle.  As  a  con- 
sequence a  division  of  opinion  likewise  exists  as  to  the 
application  of  the  statute  of  limitations,  some  courts 
holding  that  it  begins  to  run  from  the  date  of  the  certifi- 
cate, others  from  the  date  of  demand.  The  view  that  the 
statute  begins  to  run  from  the  date  of  the  certificate 
would  seem  to  be  supported  also  by  Section  70  of  the  Act 
which  seems  to  dispense  with  the  necessity  for  demand, 
particularly  when  the  certificate  has  been  outstanding 
long  enough  to  raise  a  presumption  that  it  is  past  due,^ 
although  it  is  probably  correct  to  conclude  that  certifi- 
cates of  deposit  were  not  contemplated  when  the  section 
was  written.  In  the  presence  of  conflict  in  regard  to  the 
time  M'hen  the  statute  of  limitations  does  begin  to  run 
and  the  necessity  for  demand,  it  is  perhaps  better  for 
the  holder  to  adopt  the  first  view  and  thus  preserve  his 
rights  beyond  the  possibility  of  mistake. 

Bonds,  if  they  contain  words  of  negotiability,  are  like- 
wise regarded  as,  and  are  in  fact  the  promissory  notes 
Bonds  and  their  *^f  ^^^^  person,  corporation  or  the  depart- 
coupons.  ment  of  government  which  issues  them.' 

Their  negotiability  is  not  aiTected  by  the  fact  that  they 
bear  a  seal.     (Section  6,  Title  I.) 

Their  coupons,  so  named  from  the  French  word 
"con per"  meaning  '*to  cut,"  express  the  amount  of  in- 

3.  Hillsinger  vs.  Georpa  R.'  Bk..  108  Ga.  357,  33  S.  E.  985,  75 

Am.  S.  R.  and  note. 
Elliott  vs.  Cap.  City  St.  Bk.,  128  Iowa  275,  103  N.  W.  777, 

111  Am.  S.  R.  198,  1  L.  R.  A.  N.  S.  1130  and  note. 
Cottle  vs.  Buffalo  Mar.  Bk.,  166  N.  Y.  53,  59  N.  E.  736. 

4.  Auten  vs.  Crahan,  81  111.  A.  502. 

See  64  Am.  Dec.  428,  note;  1  L.  R.  A.  299  note. 
Also  see  Note  1. 

5.  Gould  vs.  Venice,  29  Barb.  (N.  Y.)  442. 

Brainerd  vs.  N.  Y.,  etc.,  R.  R.  Co.,  25  N.  Y.  496,  500. 


274  THE  NEGOTIABLE  INSTRUMENTS  LAAV       §  184 

terest  payable  and  the  time  at  which  each  installment 
will  be  due  and,  as  the  date  of  its  maturity  approaches, 
the  maturing  interest  coupon  is  cut  off  and  presented  for 
payment  at  the  place  where  it  is  payable  on  the  date  when 
it  is  due.  The  coupons  are  designed  to  be  the  cenvenient 
instruments  for  the  collection  of  the  interest  installments 
upon  the  principal  obligation,  the  bond,  as  they  mature 
and  they  enable  the  holder  of  the  bond  to  dispense  with 
the  necessity  of  presenting  it  for  the  purpose  of  cred- 
iting upon  it  the  interest  payments  as  they  are  made. 

Anything  which  affects  the  validity  of  the  bond  like- 
wise affects  its  coupons  but  they  are  so  far  regarded  as 
separate  instruments  after  maturity  that  they  w^U  then 
bear  interest  if  the  maker  of  the  bond  defaults  in  the  in- 
terest payments  and  when  detached  have  all  the  attri- 
butes of  negotiable  instruments  and  recovery  upon  them 
may  be  had  in  a  separate  action  when  they  are  them- 
selves payable  to  order  or  to  bearer.® 

The  bond,  of  course,  must  bear  the  seal  of  its  maker 
and  be  signed  by  its  issuing  officers,  but  no  seal  is  re- 
quired upon  the  coupons  and  the  signatures  upon  them 
are  usually  a  printed  or  lithographed  fac-simile  of  the 
signatures  upon  the  bond. 

It  is  no  objection  to  the  negotiability  of  the  bond  that  it 
contains  a  statement  of  the  transaction  out  of  which  it 
arises  (Sec.  3),  is  payable  in  a  particular  kind  of  current 
money  (Sec.  6),  that  it  contains  a  provision  allowing  its 
registry  or  gives  the  holder  a  choice  to  require  something 
to  be  done  in  lieu  of  its  pa\Tnent  in  money,  for  example, 
the  privilege  to  exchange  it  for  securities  of  a  different 
kind.     (Sec.  4.)  ^ 

6.     Thompson  vs.  Perrinc,  106  U.  S.,  589,  27  L.  Ed.  29S. 

Kas.  City,  etc.,  R.  R.  Co.  vs.  Cobb,  100  Ala.  228,  13  S.  938. 
Trustees  of  the  I.  I.  Fund  vs.  Lewis,  34  Fla.  424. 


§  185, 186     PROMISSORY  NOTES  AND  CHECKS  275 

Upon  registry  the  bond  is  transferable  in  somewhat  the 
same  manner  as  certificates  of  stock  are  transferred,  then 
requiring  indorsement  and  the  entry  of  each  transfer 
upon  the  register  of  the  corporation.  Bonds  are  usually 
payable  to  the  bearer,  and,  containing  a  promise  for  the 
unconditional  payment  of  money  at  a  definite  and  fixed 
time,  or  on  demand  after  date,  they  are  in  reality  the 
sealed  promissorj^  notes  of  their  makers. 

A  check  defined.  '*Sec.  185.  A  check  is  a  bill  of  ex- 
change DRAWN  ON  A  BANK  PAYABLE  ON  DEMAND.  ExCEPT  AS 
HEREIN  OTHERWISE  PROVIDED,  THE  PROVISIONS  OF  THIS  ACT 
APPLICABLE  TO  A  BILL  OF  EXCHANGE  PAYABLE  ON  DEMAND 
APPLY  TO  A  CHECK." 

A  check  drawn  upon  a  bank  or  a  banker  is  considered 
to  be  a  bill  of  exchange  payable  upon  demand,  unless  it 
is  upon  its  face  made  payable  at  a  specific  date.'^  Every 
provision  of  this  Act  which  governs  the  interpretation 
and  enforcement  of  the  liabilities  and  rights  of  parties 
to  a  bill  payable  upon  demand,  or  at  sight,  is,  by  this 
section,  made  applicable  to  a  check  unless  by  the  Act 
itself  it  is  otherwise  provided.  All  of  its  provisions  in 
regard  to  notice  of  non-payment  and  in  regard  to  pro- 
test, if  the  check  is  upon  its  face  a  foreign  bill  (Sec.  129) 
must  be  complied  with  in  order  to  charge  indorsers. 
Failure  to  do  so  will  discharge  them  as  upon  failure  to 
give  notice  or  make  protest  of  a  bill  of  exchange. 

But  in  their  effect  upon  the  drawer  the  provisions 
of  the  Act,  in  this  respect,  are  greatly  modified  by  the 
next  section. 

Wth"    what  "Sec  186.     A  check  must  be  presented 

time  a  check  FO^  payment  within  a  reasonable  time 

must  be  after  its  issue"  or  the  drawer  will  be 

presented.  discharged  feom  liability  THERfeoN  to  the 

"Illinois.  EXTENT  OF  the  loss  caused  by  the  delay." 


7.     Riddle  vs.  Bk.  of  Montreal,  145  App.  Div.  (N.  Y.)  207. 


276  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  186 

A  check  ought  not  to  be  held  an  unreasonable  length 
of  time  either  by  the  payee  or  by  any  indorsee.    Unless 
it  is  the  check  of  a  bank  and  was  intended  for  negotia- 
tion, there  is  no  good  reason  why  it  ought  not  to  be  pre- 
sented at  once,  after  its  receipt.     A  check  differs  from 
other  bills  of  exchange  payable  upon  demand  in  that 
it  is  presumed  to  have  been  intended  for  immediate  pay- 
ment and  it  must  be  presented  for  payment  within  a 
reasonable  time  after  its  issue  and  not,  as  is  the  case  with 
an  ordinary  bill,  after  its  last  negotiation,  in  order  to 
preserve  the  liability  of  the  drawer  if  a  loss  is  sustained 
through  no  fault  of  his.    While  a  check  may  continue  in 
negotiation  for  any  reasonable  length  of  time  after  its 
issue  without  presentment  for  payment  at  the  bank  upon 
which  it  is  drawn,  yet  if  it  is  so  delayed  and  loss  is  sus- 
tained, the  drawer  will  be  released  from  liability  to  the 
extent  of  the  loss  he  may  have  suffered  by  the  delay. 
Thus,  if  the  bank  upon  which  a  check  is  drawn  which  has 
not  been  presented  for  payment  within  a  reasonable  time 
were  to  fail,  and  its  failure  cause  the  loss  of  the  money 
called  for  by  the  check,  the  drawer  will  be  released  from 
liability  upon  it.    If  the  check  has  been  transferred  from 
one  holder  to  another  without  having  paused  an  unrea- 
sonable length  of  time  in  the  possession  of  any  one  of 
them,  the  indorsers  will  not  ])e  discharged.^    But  if  it  is 
detained  for  an  unreasonably  long  time  at  any  negotia- 
tion then  such  indorsers  as  are  not  responsible  for  the 
delay  will  be  released  from  liability  by  its  unreasonable 
detention.     (Sections  7  and  71.) 

Upon  this  subject  it  is  desirable  to  distinguish  more 
clearly  the  duty  which  the  holder  owes  to  the  drawer 
and  other  parties  to  a  check  to  present  the  same  for  pay- 

8.     Columbian  Banking  Co.  vs.  Bowen,  134  Wis.  218,  114  X.  W.  45L 
Plover  Svi-s.  Bk.  vs.  Moodie,  135  la.  685,  110  X.  W.  29.  113 
N.  W.  476. 


§  186  PROMISSORY  NOTES  AND   CHECKS  277 

ment  with  the  utmost  dispatch,  when  it  is  no  longer  to 
be  negotiated.  The  authorities  are  quite  uniform  that 
the  payee  or  indorsee  of  a  check,  or  a  bank  receiving  it 
for  deposit  or  collection,  ow^es  to  every  other  party  to  the 
instrument  the  duty  to  present  it  and  obtain  the  money 
due  upon  it  immediately.  The  time  for  its  presentment 
is  usually  the  day  of  and  never  later  than  the  day  after 
its.  receipt  when  a  check  is  deposited  in  bank,  and  the 
established  and  known  custom  of  the  bank  in  regard  to  the 
collection  of  checks,  unless  it  transcends  reasonable  limits 
or  is  contrary  to  law%  will  prevail  to  determine  w^hether  or 
not  it  has  been  negligent  in  the  performance  of  its  duty. 
When  out  of  town  checks  are  deposited  with  a  bank 
for  collection  it  owes  to  its  depositor  the  duty  to  pre- 
sent them  by  the  most  practical  and  direct  method  and  if 
it  or  its  banking  connections,  through  which  it  makes 
such  collections,  unduly  and  unnecessarily  delay  their 
presentment  and  collection  and  loss  is  thereby  sustained, 
whether  by  the  failure  of  the  bank  upon  which  the  check 
is  drawn  or  by  its  dishonor  for  Avant  of  funds,  any  loss 
occasioned  by  its  delay  must,  as  between  the  depositor 
and  the  bank,  be  borne  by  the  bank.  At  the  end  of  this 
Title  I  shall  describe  more  fully  the  duty  of  banks  in 
the  collection  of  checks  and  the  methods  employed. 

You  will  remember  that  upon  the  question  of  what  is 
or  is  not  a  reasonable  time  the  nature  of  the  instrument, 
w^hatever  usage  of  trade  there  may  be  in  regard  to  such 
instruments,  and  the  facts  of  each  particular  case  will  be 
taken  into  consideration.     (Sees.  7,  71,  193.) 

When  the  immediate  presentment  of  the  check  is  not 
intended  by  the  parties  this  is  usually  indicated  by  writ- 
ing the  word  "Memorandum"  across  its 
Memorandum  ®  ,  .   i  •  i 

check.  face.     While  such  a  check  must  be  paid 

whenever  it  is  presented,  unless  it  fixes  a  date  when  it  is 


278  THE  NEGOTIABLE  INSTRUMENTS  LAW  §187,188 

payable,  the  delay  in  presenting  it  being  altogether  con- 
templated by  the  parties  and  expressed  by  the  Jiature 
of  the  instrument  itself,  cannot  affect  their  liability  upon 
the  instrument/*  Such  a  check  is  issued  as  an  evidence  of 
an  indebtedness  owing  by  the  drawer  to  the  person  to 
whom  it  is  issued  and  to  the  extent  that  its  immediate 
presentment  is  thereby  waived  by  the  drawer  and  all 
parties,  the  application  of  the  Act  in  respect  to  its  im- 
mediate presentment  is  thereby  modified.  In  all  other 
respects  a  memorandum  check  is  governed  by  its  pro- 
visions. 

Certification  of     ''Sec.  187.     Where  a  check  is  certified 
check:  effect  of.    ^^  the  bank  on  which  it  is  drawn,  the 

CERTIFICATION   IS   EQUIVALENT   TO    AN   ACCEPTANCE." 

The  certification  of  a  check  by  the  bank  upon  which  it 
is  drawn  is  the  same  as  an  acceptance  of  a  bill  of  ex- 
change and  its  effect  is  to  make  the  bank  the  principal 
debtor  upon  the  instrument.  It  does  not  relieve  the 
holder  of  the  duty  to  present  the  check  for  payment  with- 
in a  reasonable  time,  or  in  any  other  way  alter  the  rights 
and  duties  of  the  drawer  and  indorsers,  unless  the  holder 
himself  procures  its  certification.  Inasmuch  as  certifica- 
tion of  a  check  has  the  effect  of  making  the  liank  which 
certifies  it  the  principal  debtor,  the  check  is  thereby  se- 
cured to  the  extent  that  the  strength  and  worth  and  abil- 
ity of  the  bank  to  pay  its  obligations  are  considered  se- 
curity. The  liability  which  the  acceptor  assumes  by  cer- 
tification is  discussed  under  Section  62. 

,^     '*Sec.    188.      Where    the    holder    of    a 
Effect  where  the  _  ^^  ^^  w.^.irr.'nrn  np  ri?T? 

holder  of  check     check  procures  it  to  be  accepted  or  cer- 

procures  it  to  be  tified,  the  drawer  and  all  indorsers  are 

certified.  discharged  from  liability  thereon." 

9.     Franklin  Bk.  vs.  Freeniou,  16  Pick.   (Mass.)  535. 
Cushing-  vs.  Gore,  15  Mass.  69. 
Dvkers  vs.  Leather  Mfrs.  Bk.,  11  Paige  (N.  Y.)  612. 


§189  PROMISSORY  NOTES  AND  CHECKS  279 

Now,  when  the  holder  of  the  check  himself  procures  its 
certification  by  the  bank  he  thus,  in  effect,  substitutes  the 
bank  as  the  only  party  to  whom  he  looks  for  payment 
and  the  drawer  and  all  parties  who  indorsed  the  check 
before  certification  are  discharged  from  liability  upon  it. 
This  does  not  occur,  however,  when  the  draw^er  procures 
the  certification  before  delivery,  even  if  it  is  done  at  the 
holder's  request.^*^ 

When  check  "Sec.  189.     A  check  of  itself  does  not 

operates  as  an  operate  as  an  assignment  of  any  paet  of 
assignment. 

the  funds  to  the  credit  of  the  drawer 

WITH  the  bank,  and  THE  BANK  IS  NOT  LIABLE  TO  THE 
HOLDER,  UNLESS  AND  UNTIL  IT  ACCEPTS  OR  CERTIFIES  THE 
CHECK." 

A  check  is  merely  an  order  upon  the  bank  upon  which 
it  is  drawn  directing  that  upon  presentation  the  bank 
shall  pay  the  amount  of  money  for  which  it  is  written 
to  the  person  whom  it  names  or  to  his  order,  or  directing 
that  it  be  paid  to  the  bearer.  It  is  not  of  itself  an  assign- 
ment, that  is,  a  setting  apart  from  the  rest  of  the  money 
to  the  drawer's  credit  in  bank,  of  the  amount  for  which 
it  calls.  This  section  makes  this  express  provision  and 
thereby  repudiates  all  decisions  to  the  contrary. 

When  the  bank  upon  which  the  check  is  draw^n  accepts 
it  or  certifies  it,  however,  it  does  then  operate  as  an  as- 
signment of  so  much  of  the  drawer's  deposit  as  is  re- 
quired to  pay  it  and  the  money  to  pay  the  check  upon 
presentation  is  then  immediately,  by  operation  of  law, 
set  aside  out  of  the  drawer's  account  for  that  purpose. ^^ 
If  the  l)ank  permits  the  drawer  to  withdraw  his  funds 
required  for  its  payment  or  to  use  them  for  any  other 

10.  Randolph  Nat.  Bk.  vs.  Hoinblower,  160  Mass.  401. 

11.  Blake  vs.  Hamilton,  etc.,  Bk.,  79  Oh.  St.  189,  87  N.  E.  73. 
Wright  vs.  MeCarthv,  92  111.  A.  120. 

Poess  vs.  Twelfth  Ward  Bk.,  43  Misc.  45,  86  N.  Y.  S.  857,  14 
Ann.  Cas.  439. 


280  THE  NEGOTIABLE  INSTRUMENTS  LAW 

purpose,  it  will,  nevertheless,  be  obliged  to  pay  the  check 
so  accepted  by  certification  whenever  it  is  presented  for 
payment, 

I  shall  next  indicate  the  principal  duties  of  banks  and 
other  collecting  agencies  in  regard  to  the  collection  of 
checks  and  other  commercial  paper. 


A  Brief  Statement  of  the  Law  Relating  to  the  Prin- 
cipal Duties  and  Liabilities  Assumed  by  Banks  and 
Other  Agents  in  the  Collection  of  Commercial 
Paper,  and  the  Methods  Employed. 


The  deposit  of  commercial  paper  with  a  bank  for  col- 
lection constitutes  the  bank  the  agent  of  the  holder  to 
collect  it  and  it  owes  to  its  customer  that  degree  of  care 
in  the  performance  of  this  duty  which  it  would  use  to 
protect  its  own  interests. 

When  the  instrument  is  left  for  collection  at  the  bank 
at  which  it  is  payable,  the  bank  becomes  the  agent  of  the 
Paper  payable  holder  to  receive  payment.  Its  duty  re- 
counting banJc.  q^^ires  the  collecting  bank  to  charge  such 
an  instrument  to  any  sufficient  deposit  M^iich  the  debtor 
may  have  there  to  the  credit  of  his  general  account  on 
the  day  of  its  maturity,  but  the  bank  is  not  required  to 
appropriate  any  partial  sum  belonging  to  him  if  it  is  in- 
sufficient to  pay  the  w^hole  amount  of  the  instrument 
or  to  appropriate  any  special  deposit  for  that  purpose. 
If  the  instrument  is  made  payable  at  a  bank  the  fact 
that  it  is  so  made  payable  is  equivalent  to  an  order  on 
the  bank  to  pay  it  for  the  account  of  the  principal  debtor. 
(See  Sec.  87  of  Title  I.)  If  the  debtor  at  the  date  of  its 
maturity  deposits  the  money  required  to  pay  the  instru- 


RELATING  TO  COLLECTIONS  281 

ment,  for  the  purpose  of  paying  it,  and  the  instrument  is 
not  presented  at  the  bank  where  it  is  payable,  his  readi- 
ness and  ability  to  pay  there  will  relieve  him  of  the  pay- 
ment of  interest  and  costs  if  the  instrument  is  not  pre- 
sented there.  (Sec.  70.)  If  the  bank  at  which  it  is 
payable  fail  after  that  date,  his  ability  to  pay  the  in- 
strument there  at  its  maturity  would,  in  many  cases, 
effect  his  discharge,  and  if  the  instrument  is  afterwards 
dishonored  secondary  parties  will  be  released  by  the 
failure  of  the  holder  to  make  proper  presentment.  (Sec. 
70,  120.) 

It  is  quite  immaterial  whether  or  not  the  bank  receives 
compensation  for  the  service  it  renders  in  collecting  the 
instrument  and  the  degree  of  care  which  it  is  required  to 
exercise  in  the  performance  of  its  duty  is  the  same 
whether  it  is  or  is  not  paid  for  doing  so.^  It  is  very  well 
recognized  that  banks  frequently,  in  fact  almost  always 
engage  in  this  service  without  compensation,  principally 
with  a  view  to  the  advantage  they  will  thereby  gain  in 
patronage,  or  to  the  profits  which  they  expect  to  derive 
because  of  the  chance  that  they  may  be  allowed  to  use 
the  proceeds  of  their  collections. 

The  authority  to  collect  continues  after  the  maturity 
of  the  paper,  if  it  remains  unpaid  and  in  the  possession 
of  the  bank,  and  in  the  absence  of  notice  that  its  agency 
to  collect  has  terminated,  the  debtor  may  safely  pay  the 
instrument  to  the  collecting  bank  at  any  time  after  ma- 
turity.^ If  the  instrument  is  in  the  possession  of  the  bank 
at  or  after  maturity  its  possession  is  prima  facie  evi- 
dence of  its  right  to  receive  payment  and,  as  to  the  par- 
ties to  the  instrument,  payment  at  the  collecting  bank  will 

1.  Exdianoe   Bk.   vs.    Tlurd   Nafl   Bk.,   112    U.    S.   276,   288,   28 

U.  S.  (L.  Ed.)  722. 
Bailie  vs.  Augiista  Syc^s.  Bk.,  95  Ga.  277,  284,  21  S.  E.  717. 

2.  Alley  vs.  Rogers,  19  Gratt  (60  Va.)  366,  383. 


282  THE  NEGOTIABLE  INSTRUMENTS  LAAV 

then   discharge   the   instriinient   even   it"   it   is   not   sur- 
rendered.3     (Sees.  88,  119  of  Title  I.) 

The  usual  The    restrictive    form    of    indorsement, 

method  of 

indorsing  the        wliich  is  explained  in  Sections  36  and  37  of 

instrmnent  for  rpj^j^  j  -^  ugnally  employed  when  an  in- 
coliection  and  its  j  i      » 

effect.  strument,  particularly  a  check,  is  depos- 

ited with  a  hank,  but  on  bills  and  notes  left  for  collection 
the  special  or  blank  indorsement  described  in  Section  36 
of  Title  I  is  most  frequently  used. 

The  restrictive  indorsement,  as  is  explained  in  the  sec- 
tions referred  to,  constitutes  the  indorsee  the  agent  of 
the  indorser  and  does  not  transfer  to  the  indorsee  the  in- 
dorser's  ownership  in  the  funds  represented  by  the  in- 
strument. (Sec.  37.)  Its  language  is  usually  ''Pay  to 
(name  of  bank)  for  collec- 
tion and  credit  to  the  account  of 

(signature  of  depositor)." 

This  form  of  indorsement  is  a  notice  to  subsequent 
holders  that  the  instrument  may  be  transferred  only  for 
the  purpose  indicated  in  the  indorsement.  One  taking 
the  instrument  under  this  form  of  indorsement,  although 
it  is  sufficient  to  enable  him  to  bring  an  action  upon  it 
in  his  own  name,  acquires  no  ownership  in  the  instru- 
ment or  its  proceeds  except  in  his  representative  ca- 
pacity as  the  agent  of  the  indorser.  This  form  of  in- 
dorsement is  also  regarded  as  notice  to  the  person  who  is 
obliged  to  pay  the  instrument  that  if  he  pays  it  to  any 
person  other  than  the  one  named,  or  his  representative, 
he  does  so  at  his  own  peril.  (Sec.  36.) 
Duties  in  general  If  specific  instructions  are  given  as  to 
bank.  ^^^^  method  to  be  pursued  in  collecting 

the  instrument  these  must  be  strictly  observed  by  the 

3.     Bliss  vs.  Cutter,  19  Barb.  (N.  Y.)  9. 


RELATING  TO  COLLECTIONS  283 

collecting  bank,^  and  its  sub-agents,  to  whom  it  must 
transmit  them/"^  In  the  absence  of  such  instructions, 
however,  the  bank  is  required  to  perform  the  various 
duties  which  are  embraced  in  the  business  of  col- 
lections in  accordance  with  its  established  method,  its 
proper  regulations  and  the  law  relating  to  such  mat- 
ters, of  which  it  is  presumed  to  have  such  a  knowledge  as 
is  usually  possessed  by  men  engaged  in  that  business.^ 
Its  established  usage  in  such  cases,  unless  they  are  un- 
reasonable or  contrary  to  law,  will  have  much  influence 
in  determining  whether  or  not  it  has  properly  performed 
its  duty.  A  knowledge  of  these  customs  will  be  imputed 
to  its  customer  even  though  he  did  not  in  fact  know  of 
their  existence  or  application,  and  it  will  be  presumed 
that  he  intended  the  bank  to  act  in  accordance  with 
themJ 

Usage  can  only  No  matter  what  usage  may  prevail  in  re- 
collection, gard  to  the  collection  of  the  instrument  it 
will  not  excuse  the  performance  by  the  collecting  bank 
of  those  proceedings  which  it  is  obliged  to  take  for  the 
immediate  fulfillment  of  its  duty  to  collect  it  and  to 
properly  protect  its  customers'  rights.®  It  is  only 
the  method  of  their  performance  which  will  be  af- 
fected by  custom  or  usage.  No  usage  will  justify  its 
omission  to  jDerform  any  substantial  or  material  duty 
which  the  collecting  bank  is  required  by  law  to  perform, 

4.  Milwaukee  Nat'l  Bk.  vs.  Citv  Bk.  of  Oswego,  103  U.  S.  6(i8, 

26  U.  S.   (L.  Ed.)  417. 

5.  See  Note  in  34  Am.  Dec.  309,  77  A.  S.  R.  627. 

6.  Morris  vs.  Union  Nat'l  Bk.,  13  S.  D.  329,  332,  83  N.  W.  252, 

50  L.  R.  A.  182. 

7.  Hilsinffer  vs.  Ti-ickott,  86  Oh.  St.  286,  99  N.  E.  305,  Ann.  Cas. 

1913  D.  421. 
Fanners  Bk.  vs.  Newland,  97  Ky.  464. 

8.  Farley  Nat'l  Bk.  vs.  Pollock,  145  Ala.  321,  39  S.  612,  8  Ann. 

Cas.  370,  117  Am.  S.  R.  44,  2  L.  R.  A.  N.  S.  194. 
Nat  '1  Bk.  of  Commerce  vs.  Amer.  Exch.  Bk.,  151  Mo.  320.  332, 
52  S.  W.  265,  74  Am.  S.  R.  527. 


284  THE  NEGOTIABLE  INSTRUMENTS  LAW 

nor  will  any  usage  justify  the  substitution  of  any  other 
act  as  its  equivalent.  The  important  and  material  pro- 
ceedings to  be  observed  in  this  business  of  collection  are 
the  presentment  and  demand  for  acceptance  and  pay- 
ment, notice  of  dishonor  and  protest  of  the  instru- 
ment if  it  is  not  paid.  The  manner  in  which  they  are  re- 
quired to  be  done  under  the  provisions  of  the  Negotiable 
Instruments  Law  is  explained  in  appropriate  places  in 
the  preceding  pages, 
g-jjg  If  the  instrument  which  is  received  for 

accompanied  by    collection  is  a  time  bill  of  exchange  re- 
documents  of  .    .  ,  1    •  11 

shipment  or  <iuiring  acceptance  and  is  payable  more 

collateral.  than  tliree  days  after  sight,  and  if  it  is  ac- 

companied by  the  documents  of  shipment,  these  docu- 
ments, in  the  absence  of  any  instructions  to  the  contrary, 
must  be  released  to  the  drawee  by  the  collecting  bank 
upon  his  acceptance  of  the  bill  unless,  in  accordance 
with  the  customary  dealings  of  the  parties,  or,  by  rea- 
sonable implication,  the  contrary  was  intended. '^  If  the 
instrument  is  a  sight  draft,  or  is  payable  not  more  than 
three  days  after  sight,  whether  these  be  days  of  grace  or 
not,  the  documents  must  in  no  case  be  delivered  until  it 
is  paid,  in  the  absence  of  specific  instructions  requiring 
that  they  be  delivered  before  payment.® 
Presentment  of  ^^  bank  is  not  liable  for  its  failure  to  pre- 
bill  of  sent  for  acceptance  a  bill  which  does  not 

requiring  require  acceptance  and  it  would  be  a  use- 

acceptance,  less  procedure  to  do  so  when  such  an  in- 

strument is  received  for  collection,  for  its  duty  requires 
that  it  at  once  present  the  instrument  for  payment.    But 

9.     Nat'l   Bk.  of  Commerce  vs.  Mereh.  Nat'l  Bk.,  91  U.  S.  92,  23 

L.  Ed.  208. 
Commercial   Bk.   vs.   Chieaoo,  etc.,  R.  R.   Co..   160  Til.   401.  43 

N.  E.  756. 
Second  Nat'l  Bk.  vs.  Cummiims,  89  Tenn.  609,  18  S.  W.  115, 

24  Am.  S.  R.  618. 


RELATING  TO  COLLECTIONS  285 

if  the  bank  by  a  mistaken  conclusion  or  opinion  as  to  the 
legal  effect  of  the  instrument,  or  by  a  mistake  of  facts, 
should  fail  to  make  presentment  for  acceptance  when  it 
is  required,  or  should  make  it  improperly,  it  would  be  lia- 
ble for  any  loss  caused  by  its  mistake.  Section  143  of 
the  Act  determines  Avhen  presentment  for  acceptance 
must  be  made  and  in  no  other  case  is  it  necessary.  The 
third  sub-section  of  that  section,  you  will  observe,  re- 
quires that  a  draft,  even  though  payable  at  sight,  must  be 
presented  for  acceptance  if  it  is  payable  elsewhere  than 
at  the  residence  or  usual  place  of  business  of  the  drawee. 
It  is  the  bank's  duty  to  present  a  bill  for  acceptance  at 
once,  on  the  day  of  its  receipt  if  acceptance  is  required, 
unless  it  is  received  after  business  hours,  for  the  reason 
that  only  by  acceptance  can  the  drawee  be  bound,  and  be- 
cause the  owner  of  the  bill  obtains  the  right  of  an  im- 
mediate action  against  the  drawer  and  indorsers  upon 
the  failure  or  refusal  of  the  drawee  to  accept.^"  (Sec.  151.) 
It  is  its  duty  to  obtain  a  general  acceptance  unless  another 
is  authorized  or  assented  to  and,  if  that  cannot  be  ob- 
tained, it  must  treat  the  bill  as  dishonored.  (Sec.  142.) 
The  place  where  the  instrument  is  to  be  presented  for 
acceptance  and  the  manner  of  making  presentment  are 
described  under.  Section  145. 

Upon  the  dishonor  of  a  bill  by  non-acceptance  the  col- 
lecting bank  is  obliged  either  to  give  notice  of  its  dis- 
honor or  return  the  instrument  to  its  customer  in  order 
that  he  may  do  so,  and  if  it  chooses  the  latter  course  it 
must  return  the  instrument  in  time  to  allow  that  the  no- 
tice may  be  given  in  accordance  with  the  provisions  of 
this  Act.^^  These  are  to  be  found  in  Sections  89  to  118  of 
Title  I,  comprising  subdivision  seven  of  this  Act.    If  the 

10.  Exch.  Bk.  vs.   Third  Nat'l  Bk.,  112  U.   S.  276,  291,  28  U.  S. 
(L.  Ed.)  722. 

11.  See  Notes  in  34  Am.  Dec.  61,  34  Am.  Dee.  311,  77  A.  S.  R.  62L 


286  THE  NEGOTIABLE  INSTRUMENTS  LAW 

bill  requires  protest  the  collecting  bank  is  obliged  to  de- 
liver the  instrument  to  a  notary  for  that  purpose.  It  must 
know  and  be  able  to  determine  when  protest  is  re- 
quired and  it  will  be  liable  to  its  customer  if  loss  result 
from  its  failure  to  perform  this  duty.^-  A  bill  which  is 
dishonored  by  non-acceptance  need  not  be  presented  for 
payment  (Section  151),  unless  it  has  been  subsequently 
accepted  or  has  been  accepted  for  honor.     (Sec.  167.) 

The  degree  of  diligence  which  the  bank  is  required  to 
exercise  in  the  performance  of  its  duties  in  respect  to  the 
presentment  of  a  bill  for  acceptance  has  been  described 
as  that  degree  which  a  prudent  man,  careful  of  his  own 
affairs,  would  exercise  to  protect  his  own  interests.  The 
provisions  of  the  Act  which  govern  the  manner  of  making 
presentment  for  acceptance  are  to  be  found  in  Sees.  143 
to  151  inclusive,  Subdivision  3  of  Title  IT. 
Presentment  of  The  requirements  of  the  Uniform  Nego- 
piymenr*^  ^^'^  tiable  Instruments  Law  upon  the  subject 
of  presentment  for  payment  will  be  found  in  Sections  70 
to  88  inclusive  comprising  Subdivision  6  of  Title  I. 

It  is  the  custom  of  most  banks  to  give  notice  a  few  days 
before  the  maturity  of  the  instruments  which  they  hold 
for  collection,  informing  the  debtor  by  this  means  that 
the  instrument  is  about  to  fall  due  and  requesting  him 
to  call  at  the  bank  and  pay  it  at  the  proper  time.  While 
in  many  places  this  custom  is  ver}^  general,  an  omission 
to  observe  it  is  not  regarded  as  prejudicial  to  the  rights 
of  any  of  the  parties  to  the  instrument,  none  of  whom  can, 
as  a  matter  of  right,  require  the  bank  to  give  this  notice. 
But  when  notice  of  the  approaching  maturity  of  the  in- 
strument has  been  given  it  does  not  dispense  with  any  of 
the  requirements  of  the  Act  upon  the  subject  of  present- 

12.     Georgia  Nat  '1  Bk.  vs.  Henderson,  46  Ga.  487,  12  Am.  Rep.  590. 
Louisville  BankV  Co.  vs.  Aslier,  112  Ky.  138,  65  S.  W.  133, 
99  Am.  St.  Rep.  283. 


RELATING  TO  COLLECTIONS  287 

meiit  for  paymoiit,  or  dispense  witli  the  necessity  of  mak- 
ing deinand  and  the  duty  to  give  notice  of  its  dishonor  if 
the  instrument  is  not  then  paid.  The  presentment  for 
payment  must  be  made  notwithstanding  the  notice  of  its 
approaching  maturity  and  notwithstanding  even  that  the 
collecting  bank  may  have  knowledge  that  the  instrument 
will  not  be  paid  when  presented.  Its  effect,  however, 
sometimes  produces  a  waiver  of  presentment,  demand 
and  notice  of  dishonor  and  the  waiver  and  the  manner 
in  which  it  is  accomplished  and  under  what  circum- 
stances it  will  be  implied  are  discussed  in  Sections  f^2, 
104,  110  and  111  of  Title  I. 

The  presentment  must  be  made  even  if  the  party  pri- 
marily liable  upon  the  instrument  is  dead.  In  that  case 
the  instrument  must  be  presented  for  payment  to  his 
personal  representative,     (Sec.  76.) 

When  two  or  more  persons  primarily  liable  upon  the 
instrument  are  partners,  presentment  may  be  made  to 
either  of  them,  even  if  there  has  been  a  dissolution  of  the 
firm,  and  where  several  persons  who  are  not  partners 
are  primarily  liable  upon  the  instrument,  presentment 
must  be  made  to  them  all.  (Sees.  77  and  78,  Title  I.)  The 
circumstances  under  which  presentment  for  payment  is 
not  required  in  order  to  charge  the  drawer  or  indorser 
will  be  found  in  Sections  79  and  80  of  the  first  Title. 

While  the  presentment  for  payment  must  be  made 
upon  the  day  the  instrviment  falls  due  if  it  is  a  time  in- 
Time  when  strument,  or  within  a  reasonable  time 
plyment  must^be  after  its  issue  if  a  note  or  check,  or  last 
made.  negotiation  if  a  bill,  and  it  is  payable  on 
demand  (Sec.  71),  any  delay  in  making  presentment  is 
excused  when  the  delay  is  caused  by  circumstances  be- 
yond the  control  of  the  holder  and  not  due  to  his  negli- 
gence, misconduct  or  failure  to  perform  a  duty   (Sec. 


288  THE  NEGOTIABLE  INSTRUMENTS  LAW 

81).  What  will  be  taken  into  account  to  determine 
whether  or  not  the  instrument  has  been  presented  within 
a  reasonable  time  is  discussed  under  Sec.  71  and  other 
sections  there  referred  to.  Presentment  for  payment  if 
dispensed  with  altogether  under  the  circumstances  men- 
tioned in  Section  82.  Special  provision  is  made  in  the 
act  for  the  presentment  of  instruments  falling  due  on  a 
Saturday  or  a  Sunday  (Sec.  85),  and  another  section 
(Sec.  192)  provides  that  when  the  day  or  the  last  day  for 
doing  any  act  which  is  required  or  permitted  by  the  law 
to  be  done  falls  upon  Sunday  or  a  holiday,  it  may  be 
done  on  the  next  succeeding  business  day. 

If  the  instrument  is  paid  upon  presentment  the  collect- 
ing bank  must  remit  the  proceeds  to  the  person  from 
Duty  of  the  whom  it  received  the  bill  or  note  for  coL 
^re^entment  lection  unless  it  appear  that  another  is 

their  true  owner.^^  The  remittance  must  be  made  in 
accordance  with  any  special  instructions  which  it  may 
have  received  from  its  customer  or,  in  the  absence  of 
these,  in  accordance  with  its  general  custom,^^  or  the  cus- 
tomer must  be  notified  of  the  payment  of  the  instru- 
ment and  the  proceeds  lield  subject  to  his  order.  If  the 
collection  is  made  for  the  account  of  a  depositor  and 
the  proceeds  are  credited  to  his  general  account  that  will 
be  a  fulfillment  of  the  bank's  duty  to  remit,  unless  it  is 
done  contrary  to  his  instructions.  This  procedure  is 
simple  enough  upon  payment  of  the  instrument  but  upon 
its  dishonor  the  collecting  bank  exposes  itself  to  liability 
for  loss  unless  it  strictly  observes  the  requirements  of 
the  Negotiable  Instruments  Law  in  regard  to  the  pro- 
cedure then  prescribed. 

13.  Bank  vs.  Friar.  88  Mo.  App.  39. 

Union  Bk.  vs.  Johnson,  9  Gill  &  J.  (Md.)  29 1. 

14.  Harvesting  Mach.   Co.   vs.   Yankton   Svg.   Bk.,   15   S.   D.   196, 

87  N.  W.  974. 


RELATING  TO  COLLECTIONS  289 

Any  negotiable  instrument  which  has  been  dishonored 
by  non-acceptance  or  non-payment  may  be  protested  upon 
either  dishonor,  but  protest  is  not  required 
protest.  except  in  the  case  of  a  foreign  l)ill  of  ex- 

change. (Sec.  118.)  If  the  dishonored  instrument  is  a  for- 
eign bill  (Sec.  129),  or  a  bill  which  has  been  accepted  for 
honor,  or  one  which  is  presented  to  the  referee  in  case  of 
need  (Sec.  161),  it  must  be  protested  (Sees.  152  and  167). 
The  place  and  manner  of  protest,  by  whom  it  is  to  be  made 
arid  the  formalities  to  be  observed  in  making  it,  are  pre- 
scribed in  Sections  152  to  160,  inclusive,  of  the  Act.  Yon 
will  observe  from  Section  152  that  if  any  of  the  require- 
ments of  the  Act  in  that  regard  are  omitted  the  bill  will 
not  have  been  'Muly  protested"  and  the  drawer  and  in- 
dorsers  will  be  discharged.  If  this  should  occur 
through  the  negligence  of  the  bank  it  will  be  liable  to  its 
customer.^  "^  The  subject  is  explained  generally  in  Sub- 
division 4  of  Title  II. 

When  protest  is  made,  and  even  if  it  is  not  required, 
it  is  necessary  that  notice  of  dishonor  be  given  to  all 
Duty  to  give  parties  whom  the  holder  desires  to 
dishonor.  charge.    A  collecting  bank,  however,  be- 

ing the  agent  of  the  holder,  may  avail  itself  of  the  pro- 
vision of  Section  94  of  the  Act  and  give  the  notice  to  its 
principal  alone,  and  this  it  usually  does.  If  a  different 
agreement  requires  it,  or  if  the  collecting  bank  accepts 
the  instrument  for  collection  under  circumstances  from 
which  a  duty  to  notify  all  secondary  parties  can  be  rea- 
sonably inferred,  it  will  be  obliged  to  give  the  notice  of 
dishonor  to  every  party  and  will  obligate  itself  to  its  cus- 
tomer for  any  loss  he  may  sustain  by  its  failure  to  do 

15.     Georgia  Nat  '1  Bk.  vs.  Henderson,  46  Ga.  487,  12  Am.  Rep.  '/90. 


290  THE  NEGOTIABLE  INSTRUMENTS  LAW 

so.^"  The  provisions  of  the  Act  which  describe  the  man- 
ner in  which  it  must  be  done  and  determine  when  and  to 
w4iom  the  notice  must  be  given  will  be  found  in  Sub- 
division 7  of  Title  I,  in  sections  numbered  from  89  to  118, 
inclusive.  If  the  instrument  has  been  forwarded  for 
collection  through  its  sub-agents  l)y  the  bank  of  first  de- 
posit, each  sub-agent  may  give  the  notice  to  his  immediate 
transferer  within  the  time  fixed  in  Section  94  or  he  may 
give  it  to  the  parties  generally. 

If  the  customer  actually  knows  of  the  dishonor  of  the 
instrument  and  the  formal  notice  of  dishonor  to  other 
parties  is  not  required  to  be  given,  by  the  bank,  the  cus- 
tomer must  himself  proceed  at  once  to  notify  all  those 
to  whom  he  looks  for  payment  (Sec.  90).  He  must  not 
wait  until  the  dishonored  instrument  is  returned  to  him, 
at  least  he  ought  not  to  delay  beyond  the  time  allowed 
by  Sections  103  and  104,  which  fix  the  time  within  which 
he  is  required  to  give  the  notice  to  antecedent  parties. 
The  effect  of  the  notice,  to  and  by  whom  it  must  be  given 
and  wiiat  parties  are  benefited  by  it  are  discussed  in  the 
sections  above  referred  to. 

When  the  collection  is  to  be  made  at  a  place  other 
than  the  place  where  the  collecting  bank  is  located,  it  is 
Selection  of  sub-  its  duty  to  forward  the  instrument  on  the 

care  required.  ^^J  ^^  ^^^^  ^^y  ^fter  its  receipt  to  a  sub- 
agent.  It  must  use  due  care  in  the  selection  of  its  sub- 
agent  and  must  not  intrust  any  of  its  customers'  business 
to  one  to  whom  it  would  not  intrust  business  of  its  own.^'^ 

16.  Auten  vs.  Manistee  Nt.   Bk.,  67  Ark.  243,  54   S.   W.  337.  47 

L.  R.  A.  329. 
Louisville  Bksj.   Co.  vs.  Asher,  112   Kv.  138,   65   S.   W.   133, 
99  A.  S.  R.  283. 

17.  Brown  vs.  Peoples  Svc?s.  Bk.,  59  Fla.  163,  52  S.  719,  52  L.  R. 

A.  N.  S.  608. 
Wilson  vs.  Carlinville  Nat 'I  Bk.,  187  111.  222,  58  N.  E.  250, 

52  L.  R.  A.  632. 
Irwin   vs.   Reeves  Pullev   Co..  20  Ind.   A.   101,  48  N.  E.   601, 

50  N.  E.  317. 


RELATING  TO  COLLECTIONS  291 

If  it  lias  received  any  specific  instructions  in  regard  to 
the  collection  of  the  instrument  or  the  manner  in  which 
its  endeavor  to  collect  it  is  to  be  reported  to  its  customer, 
it  must  forward  these  also.^^  Should  its  sub-agent  neg- 
lect to  acknowledge  the  receipt  of  the  instrument  within 
a  reasonable  time  after  it  was  sent,  the  sending  bank 
must  make  inquiry  to  learn  whether  or  not  it  has  been  re- 
ceived. Any  neglect  to  do  so  from  which  a  loss  results 
will  impose  a  liability  upon  the  collecting  bank  to  the 
extent  of  the  loss  sustained.^'* 

If  the  sub-agent  selected  to  make  the  collection  is  the 
bank  ujion  wiiich  the  instrument  is  drawn,  or  is  in  any 
way  interested  in  the  instrument  adversely  to  the  in- 
terest of  its  owner,  the  collecting  bank  will  not  be  deemed 
to  have  used  due  care  in  its  selection  if  the  sub-agent 
default  in  the  collection  of  the  instrument  or  the  remit- 
tance of  the  proceeds,  and  it  will  be  liable  to  its  customer 
for  his  loss.^*^ 

The  Act,  in  Title  III,  defines  a  check  to  be  a  bill  of 
exchange  drawn  on  a  bank  and  if  its  presentment  for 
The  coUection  of  pajment  is  delayed  an  unreasonable 
checks.  length  of  time  after  its  issue  Section  186 

provides  that  the  drawer  will  be  released  from  liability 
to  the  extent  of  any  loss  he  may  thereby  suffer  by  rea- 
son of  the  delay.  Elsewhere  the  act  provides  that  a  bill 
of  exchange  payable  on  demand  must  be  presented  for 
payment  Mdthin  a  reasonable  time  after  its  last  negotia- 
tion (Section  7).    You  will  observe  then  that  checks  re- 

18.  Borap  vs.  Nininger,  5  Minn.  523. 

19.  Shipsey  vs.  Bowery  Nat'l  Bk.,  59  N.  Y.  485. 
Second  Nat'l  Bk.  vs.  Merch.  Nat'l  Bk.,  Ill  Ky.  930. 

20.  First  Nafl  Bk.  vs.  Fourth  Nat'l  Bk.,  6  C.  C.  A.  183,  56  Fed. 

967. 
Planters'  Mercantile  Co.  vs.  Armour  Pko-.  Co.,  109  Miss.  470, 

69  So.  293. 
Am.  Exclig.  Bk.  vs.  Metropolitan  Bk.,  71  Mo.  App.  451. 


292  THE  NEGOTIABLE  INSTRUMENTS  LAW 

quire  more  prompt  presentment  than  do  bills.  The  Uni- 
form Negotiable  Instruments  Law  recognizes  in  this 
provision  a  universal  banking  custom  to  handle  checks 
with  the  utmost  dispatch.  This  provision  applies,  of 
course,  to  the  presentment  of  the  check  by  the  holder  at 
the  counter  of  the  bank  upon  which  it  is  drawn  as  well 
as  when  these  instruments  are  collected  through  other 
banks,  but  their  collection  being  peculiarly  a  function  of 
banks,  perhaps  it  will  be  interesting  to  know  how  checks 
and  the  present  wonderfully  efficient  methods  of  effecting 
their  collection  have  been  evolved  from  the  primitive  ne- 
cessities of  the  early  bankers. 

Early  history  of  It  appears  that  very  early  in  the  history 
banking  and  the  ^^  banking  the  issue  of  chocks  against 
evolution  of  tne  ^  i        j.    •       tr' 

check.  deposits  was  unknown,  at  least   m   v^ng- 

land,  from  whence  so  many  of  our  banking  customs  have 
been  derived.  It  w^as  the  practice  then  of  the  goldsmiths, 
who  were  the  bankers  in  those  early  days,  to  receive  de- 
posits of  money  from  their  customers  and  they  combined 
its  care  with  their  business  of  manufacturing  gold  and 
silver  plate.  As  an  evidence  of  their  indebtedness  to 
their  customers  for  the  deposits  made  with  them  they 
gave  them  certificates  against  which  their  customers  were 
permitted  to  draw.  When  the  customer  wished  to  draw  a 
part  of  his  deposit  he  was  obliged  to  present  his  certificate 
to  his  banker  so  that  the  amount  of  his  withdrawal  might 
be  credited  upon  it.  This  becoming  inconvenient  as  men 
used  their  banking  credits  in  their  business,  an  improve- 
ment was  evolved  by  the  issue  of  several  receipts  in  con- 
venient amounts,  instead  of  a  single  certificate  for  the 
whole  deposit.  Later  these  were  followed,  in  about  the 
year  1729,  by  the  issue  of  printed  bank  notes  which  in 
their  wording,  according  to  the  Hon.  Secretary  of  the 
London  Bankers   Clearing  House,   Mr.   Robert   Martin 


RELATING  TO  COLLECTIONS  298 

Holland,  resembled  the  notes  of  the  Bank  of  England  of 
today.  Not  yet  fully  meeting  the  convenient  requirements 
of  their  customers  the  bankers  began,  a  few  years  later, 
to  issue  printed  checks  to  be  filled  in  by  the  customer 
himself. 

As  the  use  of  checks  grew  and  each  bank- 
Early  method  of  ^  _,    ^  .  If.     n    -1       •  •  -P 

"clearing"  and    er  found  himself  daily  m  possession  ot 
settling  balances,  checks  drawn  upon  other  banks  which  had 
been  left  with  him  for  his  customers'   credit,  he  was 
obliged  to  send  out  his  clerks  to  collect  them  at  the  banks 
upon  which  they  were  drawn.    This  method  of  collection 
being  attended  with  considerable  difficulty  and  involving 
delay  and  the  danger  of  loss  and  robbery,  the  next  devel- 
opment appears  to  have  been  an  endeavor  to  facilitate 
their  collection  by  sending  the  ''walk  clerks,"  as  the  col- 
lectors were  called,  to  meet  at  one  bank  one  week  and  an- 
other the  next  to  effect  exchanges.     Again  this  method 
proving  inconvenient  by  reason  of  the  increasing  number 
of  London  bankers,  these  "walk  clerks"  formed  the  prac- 
tice of  meeting  at  lunch  time  at  the  "Five  Bells,"  a  public 
house  in  Dove  Court,  Lomlmrd  street,  near  the  site  of  the 
present  London   Clearing  House.     There  in  the  public 
room,  each  day  after  lunch,  the  exchange  of  checks  was 
made  between  the  clerks  from  the  different  banks  and  the 
balances  due  each  were  paid  in  cash.  The  volume  of  checks 
handled  at  these  meetings  and  the  large  amount  of  cash 
often  required  to  settle  the  balances,  caused  the  bankers 
to  be  alarmed  at  the  attendant  risks  and  they  rented  a 
room  near  this  place  in  which  their  clerks  might  meet 
and  make  their  exchanges  and  settlements  with  greater 
safety. 

From  time  to  time  convenient  regulations  were  pro- 
vided to  enable  the  clearing  clerks  to  complete  their  ex- 
changes with  dispatch  and  later  the  use  of  cash  in  set- 


294  THE  NEGOTIABLE  INSTRUMENTS  LAW 

tlements  was  dispensed  with  altogether,  gains  or  losses 
being  paid  by  drafts  upon  the  Bank  of  England  at  which 
all  bankers  then  found  it  convenient  to  keep  balances 
for  that  purpose.  In  this  manner  was  evolved  the  won- 
derful organizations  of  the  Clearing  Houses  of  today  by 
means  of  which,  with  instant  dispatch,  millions  of  dol- 
lars in  the  aggregate  of  checks  are  daily  reduced  to  com- 
paratively small  ba'lances  and  immediately  paid. 

A  description  of  the  methods  employed  in  making  the 
exchanges  and  settlements  at  the  Clearing  Houses  would 
serve  no  useful  purpose  here,  these  being  voluntary  as- 
sociations of  bankers  whose  operations  are  entirely 
within  the  control  of  their  members.  Compliance  with 
their  reasonable  regulations  for  the  collection  of  instru- 
ments which  pass  through  their  control  will,  however, 
effectually  relieve  the  collecting  bank  from  any  imputa- 
tion of  negligence  in  effecting  its  collections,  although  no 
usage  of  the  Clearing  Houses  will  dispense  with  the  per- 
formance by  the  collecting  bank  of  those  duties  imposed 
upon  it  by  law.  Being  voluntary  associations.  Clearing 
Houses  control  the  qualifications  of  their  members  and 
frequently  restrict  their  number  or  limit  their  member- 
ship to  National  Banks  to  the  exclusion  of  State  Banks 
and  Trust  Companies,  or  private  bankers.  Non-member 
banks  doing  a  deposit  business  are  then  required  to  clear 
their  checks  through  member  banks  if  they  would  avoid 
the  necessity  of  presenting  them  at  the  counters  of  the 
banks  upon  which  they  are  drawn.  They  thereby  assume 
a  risk  not  attaching  to  member  banks  if  checks  deposited 
with  them  are  unduly  delayed  in  presentment  because 
they  see  fit  to  present  them  for  payment  through  clearing 
banks  and,  in  the  absence  of  permission  or  assent  by 
their  customer  to  this  course  of  dealing,  they  are  not  re- 
lieved of  liability  to  him  if  loss  is  sustained  which  is  at- 


KELATlN(i  TO  COLLECTIONH  29.-) 

tributable  to  the  delay  that  may  be  occasioned  by  thu 
method  of  presentment. 

Most  banks  fix  a  time  in  the  day's  business  ]M\)i-i- 
which  checks  must  be  deposited  if  they  are  to  be  col- 
lected on  the  day  of  deposit.  It  is  usually  at  or  about 
noon  and  deposits  are  all,  by  custom,  received  and  cred- 
ited to  their  customers'  accounts  subject  to  their  pay- 
ment by  the  banks  upon  which  the  checks  are  drawn  after 
presentment  through  the  clearing  house.  Ordinarily  a 
notice  to  that  effect  is  printed  in  the  customers'  deposit 
book.  All  checks  received  before  the  clearing  hour  are  to 
be  presented  on  the  day  of  their  deposit  and  a  failure  to 
do  so  might  make  the  bank  liable  for  any  loss  due  to  its 
negligence.  (Sec.  186.)  Deposits  which  are  received  sub- 
sequent to  the  clearing  hour  are,  however,  properly  held 
until  the  next  day's  clearing  unless  they  are  received 
with  special  instructions  re(iuiring  their  immediate  pre- 
sentment at  the  counter  of  the  drawee  bank  or  unless,  in 
some  special  cases,  as  when  the  bank  receiving  the  de- 
posit has  knowledge  of  the  impending  insolvency  of  the 
drawer  of  the  check  or  the  bank  upon  which  it  is  drawn, 
the  risk  of  holding  it  until  the  next  day,  would  mate- 
rially increase,  particularly  if  it  can  be  presented  at 
once  without  great  inconvenience.^^  The  depositor  may 
give  express  instructions  as  to  the  manner  in  which  he 
desires  his  check  or  other  instrument  collected  and  if  the 
deposit  is  accepted  subject  to  his  instructions,  or  if  it 
is  the  custom  of  the  bank  to  handle  the  deposits  of  cer- 
tain of  its  customers  in  particular  ways,  no  deviation  will 
be  excused  notwithstanding  its  general  usage. ^^ 

21.  Pinknev  vs.  Kanawlia  Valtev  Bk..  68  W.  Va.  254,  9  S.  E.  1012, 

Ann.  Cas.  1912  B.  115,  .32  L.  R.  A.  N.  S.  987. 
First  Nat'l  Bk.  vs.  Fourth  Nat"l  Bk.,  77  N.  Y.  320,  324. 

22.  Second   Nat'l   Bk.   vs.   Bank  of  Alma,  99   Ark.   386,   396,   136 

S.  W.  472. 
Finch  vs.  Karste,  97  Mich.  21,  56  N.  W.  123. 
Lord  vs.  Hinsrham  Nat'l  Bk..  186  Mass.  161,  71  N.  E.  312. 


296  THE  NEGOTIABLE  INSTRUMENTS  LAW 

The  medium  of  ^^^^  collecting  bank  is  not  authorized  to 
payment.  accept  in  payment  of  the  collection  any 

other  means  of  payment  than  money  and  when  it  does  ac- 
cept the  check  of  the  debtor  or  the  paying  or  remitting 
bank,  it  does  so  at  its  o^^^l  risk,  in  the  absence  of  special 
authority  from  its  depositor.  If  it  accepts  a  check  or  ex- 
change in  pa\mient  which  should  prove  uncollectible  and 
its  failure  to  olitain  proper  payment  operate  to  prejudice 
the  owner  of  the  instrument  entrusted  to  it  for  collection, 
the  bank  will  nevertheless  be  liable  to  him.^^  If  it  dis- 
cover the  imposition  and  recover  the  instrument  for 
which  the  worthless  check  or  exchange  was  given  in  time 
to  take  the  necessary  steps  to  preserve  the  liability  of 
the  secondary  parties  to  the  owner  of  the  instrument 
no  liability  will  attach  to  the  collecting  bank,  for, 
in  that  event,  its  mistake  will  have  proven  to  be  quite 
harmless.  This  would  have  to  be  done  in  the  case  of  a 
foreign  bill  requiring  protest,  on  the  very  day  of  its  ma- 
turity (Sec.  155)  and  in  the  case  of  an  ordinary  bill  or  a 
note  before  the  close  of  the  day  after  its  dishonor. 
(Sees.  103,  104.) 

Ha\dng  accomplished  the  collection  of  the  mstru- 
ment  it  is  the  bank's  duty  to  remit  the  proceeds  to  its 
customer  or  dispose  of  them  in  the  manner  I  have  al- 
ready described,  and  it  will  not  be  required  to  concern  it- 
self over  any  question  about  the  title  to  the  instrument 
or  its  proceeds,  having  fully  performed  its  duty  when  it 
pays  over  the  proceeds  to  its  principal.^^ 

I  stated  at  the  beginning  of  this  brief  exposition  of 
the  principal  rules  which  govern  the  duties  and  liabilities 

"IT    Hazlett  vs.  Connel  Bk.,  132  Pa.  St.  118   19  AtL  55 

Bank  vs.  Cumminos,  89  Tenn.  609,  620,  18  S.  W.  115. 
Bank  vs.  Union  Trust  Co.,  149  111.  34.3. 
94      Mononealiela  Nat'l  Bk.  vs.  First  Nat'l  Bk.,  226  Pa.  St.  270, 
976    75  Atl.  359.  26  L.  R.  A.  N.  S.  1098  and  note. 


RELATING  TO  COLLECTIONS  297 

of  banks  and  agents  in  the  collection  of 
Relation  of 

depositors  to  commercial  paper  that  the  bank  which  re- 
sub-agents,  ceives  the  instrument  for  collection  from 
its  customer  becomes  his  agent  in  its  collection.  If  the 
collection  is  effected  by  the  employment  by  that  bank  of 
sub-agents,  it  must  sometimes  be  determined  what  rela- 
tion the  sub-agents  bear  to  the  owner  of  the  instrument. 
There  appears  to  be  conflict  of  authority  upon  this  sub- 
ject based  upon  conflicting  views  of  the  liability  of  the 
first  bank  or  any  bank  in  the  series  through  which  the  col- 
lection is  made,  for  the  acts  of  each  subsequent  sub-agent. 
Some  courts  hold  that  each  bank  is  liable  only  for  its  own 
acts  or  omissions  in  the  performance  of  its  particular 
duty  in  the  collection  and  where  this  interpretation  pre- 
vails, each  bank  in  the  series  is  held  to  be  directly  liable  to 
the  owner  of  the  instrument.^^  Others  hold  that  all  are 
sub-agents  of  the  first  bank  and  each  of  the  one  from 
which  it  received  the  instrument,  and  these  cases  hold 
that  the  bank  which  receives  the  instrument  in  the  first 
instance,  from  its  customer,  is  liable  to  him  for  the  acts 
or  omissions  of  its  sub-agents,  but  they  do  not  deprive 
the  owner  of  the  instrument  of  his  right  of  action  against 
the  sub-agents,  if  he  elects  to  pursue  it  against  them.^^ 

Upon  the  collection  of  the  instrument  the  agency  re- 
lation ceases  and  the  collecting  bank  becomes  the  simple 

25.  Wilson  vs.  Carlinville  Natl  Bk.,  187  111.  222.  58  N.  E.  250, 

52  L.  R.  A.  632. 
First  Natl  Bk.  Chicago  vs.  Bank  of  Whittier,  221  111.  319. 
Sec.  Natl  Bk.  vs.  Merch.  Natl  Bk.,  11  Ky.  930,  65  S.  W.  4, 

98  A.  S.  R.  439. 
Columbia  See.  Natl  Bk.  vs.  Cummin^s,  89  Tenn.  609,  18  S. 

W.  115,  24  A.  S.  R.  618  and  note.  " 

26.  Exchg.  Bk.  of  Pitts,  vs.  Third  Natl  Bk.  of  N.  Y.,  112  U.  S.  276. 

Bailie  vs.  Augusta  Svgs.  Bk.,  95  Ga.  277,  21  S.  E.  717. 

St.  Nicholas  Bk.  vs.  Farmer's  Natl  Bk.,  128  N.  Y.,  26,  27  N. 
E.  849. 


298  THE  NEGOTIABLE  INSTRUMENTS  LAW 

contract  debtor  of  its  customer,^'^  unless  the  collection 
was  undertaken  under  an  agreement  by  the  terms  of 
which  the  proceeds  are  to  be  otherwise  held,  when,  of 
course,  the  proceeds  will  be  held  under  the  terms  of  the 
trust  agreement. 

27.     Commercial  Bk.  of  Penn.  vs.  Armstroiii^.  148  U.  S.  50.  13  S. 
Ct.  533. 
Nor.  Car.  Corp.  Comm.  vs.  Merch.  &  Farmer's  Bk.,  137  N,  C. 
697,  50  S.  E.  308,  2  Ann.  Cas.  537. 


§190,191  GENERAL  PROVISIONS  299 


TITLE    IV. 


General  Provisions. 


Section 

193  Reasonable  time;  wliat  con- 
stitutes. 

194  Time,  how  computed. 

195  Api)lication  of  Act. 
1!)()     Law     M  e  r  c  li  a  n  t ;     when 

srovems. 


Section 

190  Title  of  the  Act. 

191  Definition    and    meaning    of 

terms. 

192  Persons     "primarily     liable 

on    instiTiment ' ' ;    second- 
ary parties. 

Title  of  the  ''Sec.  190.    This  Act  shall  be  known  as 

Act.  XHE  Negotiable  Instruments  Law." 

The  title  of  the  Act  is  omitted  in  many  of  the  .States 
and  is  of  importance  only  for  citation  and  reference.  The 
Act  is  very  generally  known  as  the  ''Uniform  Negotiable 
Instruments  Law." 

Definition  and       "Sec.  191.    In  this  Act,  unless  the  con- 
meaning  of  text   otherwise   requires: 

*®"^*  'Acceptance'      means     an      acceptance 

completed  by  deli\'ery  or  notification. 

'Action'  includes  counter-claim  and  set-off. 

'Bank'  includes  any  person  or  association  of  per- 
sons carrying  on  the  business  of  banking  whether  in- 
corporated OR  not. 

'Bearer'  means  the  person  in  possession  of  a  bill 
OR  note  which  is  payable  to  bearer. 

'Bill'  means  a  biij:.  of  exchange,  and  'note'  means 
negotiable  promissory  note. 

'Delivery'  means  transfer  of  possession,  actual  or 
constructive,  from  one  person  to  another. 

'Holder'  means  the  payee  or  indorsee  of  a  bill  or 
note,  who  is  in  possession  of  it,  or  the  bearer  thereof. 

'Indorsement'  means  an  indorsement  completed  by 
delivery. 

'Instrument'  means  negotiable  instrument. 


300  THE  NEGOTIABLE  INSTRUMENTS  LAW        §  192 

'Issue'  means  the  first  delivery  of  the  instrument, 
complete  in  form,  to  a  person  who  takes  it  as  a  holder. 

'Person'  includes  a  body  of  persons,  whether  in- 
corporated OR  not. 

'Value'  means  valuable  consideration. 

'Written'  includes  printed,  and  'writing'  includes 
print." 

These  definitions  seem  sufficiently  complete  to  emable 
any  person  readily  to  understand  them  without  further 
explanation,  in  view  of  what  has  already  been  said  in 
other  places  where  the  terms  defined  have  been  em- 
ployed. 

In  determining-  the  application  of  this  law,  the  proper 
course  to  pursue  is  first  to  examine  its  language  and  in- 
([uire  what  is  its  natural  meaning.  Reference  to  the  law 
as  it  previously  stood  is  unnecessary  when  the  language 
of  the  Act  is  itself  plain  and  explicit  and  fully  covers  any 
situation  to  be  inquired  into. 

Lord  Herchell,  commenting  judicially  on  the  English 
Act,  has  said  that  it  is  the  duty  of  courts  to  give  to 
its  language  its  plain  ordinary  meaning,  uninfluenced  by 
a  consideration  of  how  the  law  previously  stood,  and  our 
own  Act  being  like  the  English  Act  an  attempt  to  em- 
body in  code  form  all  the  law  upon  the  subject  of  nego- 
tiable instruments,  must  be  interpreted  in  the  same  man- 
ner. It  is  the  law\  Before  its  simple,  plainly  expressed 
terms,  all  conflicting  judicial  interpretation  of  the  law 
merchant  cease  to  be  authority. 

Person  "Sec  192.     ''The  person  'primarily'  lia- 

primarily  liable  ble  on  an  instrument  is  the  person  who 
on  instrument.  gy  rpj^j,  terms  of  the  instrument  is  ab- 
"Kansas.  solutely  required  to  pay  the  same.     All 

other  parties  are  'secondarily'  liable." 

It  is  not  difficult  to  determine  who,  by  the  terms  of 
an  instrument,  is  required  absolutely  to  pa}^  it.  Upon  a 
promissory  note,  for  example,  every  person  who  signs 


§193  GENERAL   PROVISIONS  301 

it  upon  its  face  would  appear  to  l)e  the  person  who  pri- 
marily promises  to  pay  it,  unless  he  indicates  by  ap- 
propriate words  in  writing  upon  the  instrument  that 
he  does  not  undertake  to  \jay  it  in  the  capacity  of  maker. 
The  acceptor  of  a  bill  of  exchange  is  the  person  appear- 
ing upon  the  face  of  an  accex)ted  bill  to  be  the  one  pri- 
marily and  absolutely  required  to  pay  it.  But  when  one 
draws  a  bill  upon  himself,  the  drawer  is  then  the  person 
absolutely  obliged  to  pay  even  when  unaccepted,  since 
by  Section  130  the  holder  may  treat  such  a  bill  as  the 
promissory  note  of  the  drawer. 

Reasonable  time:  "Sec.  193.  In  deteemining  what  is  a 
what  constitutes  'reasonable  time'  or  an  'unreasonable 
"So.  Dakota.        r^jj^^j,'  regard  is  to  be  had  to  the  nature 

OF  THE  INSTRUMENT,  THE  USAGE  OF  TRADE  OR  BUSINESS  (iF 
any)  with  respect  to  such  INSTRUMENTS,  AND  THE  FACTS 
OF   THE   PARTICULAR   CASE."" 

Here  is  a  provision  for  the  observance  of  which  it  is 
impossible  to  state  a  general  rule.  What  would  be  a  rea- 
sonable or  an  unreasonable  time  in  respect  to  one  instru- 
ment might  not  be  so  regarded  in  respect  to  another. 
It  seems  that  the  intention  of  the  parties  is  not  at  all 
taken  into  account,  only  the  nature  of  the  instrument  and 
the  usage  of  a  trade  or  business  and  the  facts  of  a  par- 
ticular case,  unless  the  last  clause  of  the  section  is  to  be 
regarded  as  so  comprehensive  that  the  intention  of  the 
parties  in  regard  to  the  time  the  instrument  may  stop  in 
the  course  of  its  negotiation,  or  may  be  delayed  in  its 
presentation,  shall  be  taken  into  account  as  part  of  the 
facts  of  the  particular  case.  Under  Sections  7,  53,  71  and 
144  much  has  already  been  said  on  this  subject  and  the 
effect  of  a  failure  to  negotiate  or  present  an  instrument 
for  acceptance  or  for  payment  within  a  reasonable  time, 
has  already  been  pointed  out.     See  these  sections. 


302  THE  NEGOTIABLE  INSTRUMENTS  LAW  §194,195 

What  usage  of  a  trade  or  business  will  excuse  prompt 
presentment  of  the  instrument  is  also  difficult  if  not  im- 
possible to  see.  One  of  the  elements  of  a  valid  custom, 
one  absolutely  necessary  to  give  it  the  force  of  law,  is 
that  it  must  be  reasonable.  If  a  custom  which  sanctions 
long  delay  in  the  presentment  or  negotiation  of  negotiable 
instruments  is  relied  on  to  aid  in  determining  whether  or 
not,  in  contemplation  of  the  provisions  and  purposes  of 
this  Act,  the  delay  is  unreasonable,  it  is  very  much  doubt- 
ed that  such  a  custom  would  excuse  the  delay,  and  I  have 
little  hesitation  in  saying  that  it  would  not. 

Time:  how  "Sec.  194.     Where  the  day,  or  the  last 

computed.  day,  for  doing  any  act  herein  required 

OR  permitted  to  be  done  falls  on  SUNDAY,  OR  ON  A  HOLI- 
DAY, THE  ACT  MAY  BE  DONE  ON  THE  NEXT  SUCCEEDING  SECU- 
LAR OR  BUSINESS  DAY.'' 

Section  85  of  this  Act  contains  the  pro\asion  that  an  in- 
strument falling  due  on  Sunday  or  a  holiday  shall  be  pre- 
sented for  payment  on  the  next  succeeding  business  day. 
By  this  section  the  same  provision  is  applied  to  any  act 
which  the  law  requires  or  permits  to  be  done.  Broadly 
then,  when  the  day  for  doing  any  act  in  connection  with 
the  acceptance,  presentment,  payment,  protest,  or  giving 
notice  of  the  dishonor  of  a  negotiable  instrument  falls 
upon  a  Sunday  or  a  holiday,  it  may  be  done  upon  the  next 
succeeding  business  day  and,  to  be  effective,  it  must  be  so 
done.  ''Secular  day"  means  worldly  or  business  day  as 
distinguished  from  that  day  of  each  week  universally 
given  over  to  religious  worship  and  which,  in  this  coun- 
try, is  Sunday. 
Application  of       "^^C-  195.     "The  provisions  of  this  Act 

Act,  do   not  apply   to   NEGOTIABLE   INSTRUMENTS 

oArizona.  made  and  delivered  prior  to  the  taking 

EFFECT    hereof." 

Negotiable  instruments  executed  before  the  passage 
of  this  Act  are  not  governed  by  its  provisions.     The 


§]f)(i  GENERAL   PH()\'ISl()XS  :}0;^. 

rights  and  liabilities  of  persons  who  became  parties  to  an 
instrument  made  and  delivered  before  the  passage  of 
this  Act  will  be  enforced  and  determined  by  the  law  as  it 
was  upon  the  date  when  the  instrument  was  made  and  de- 
livered and  not  by  this  Act.  The  duties  and  rights  of 
those  who  become  parties  to  the  instrument  by  indorse- 
ment after  the  date  when  the  Act  has  taken  effect  are 
likewise  governed  by  the  law  in  effect  at  the  date  when 
the  instrument  was  made.^ 

Law  Merchant:  "Sec.  196.  In  any  case  not  provided  for 
when  governs.  ix  the  Act,  the  rules  of  the  Law  Mer- 
chant SHALL  govern." 

Therefore,  in  any  case  which  is  provided  for  in  this 
Act,  the  rules  of  the  Law  Merchant,  in  conflict  with  its 
provisions,  do  not  apply.  In  tiie  introduction  to  these 
papers  a  brief  history  of  the  Law  Merchant  and  of  the 
first  recorded  use  of  bills  of  exchange  and  promissory 
notes  and  a  short  history  of  the  early  codification  of  the 
rules  of  the  Law  Merchant  in  respect  to  them  were  given. 
These  rules,  being  embodied  in  a  multitude  of  judicial 
decisions,  all  of  which  were  well  kno^v^l  to  the  Conference 
at  which  this  Act  was  prepared,  it  can  with  safety  be  said 
that  the  negotiable  instruments  code  contains  provision 
for  practically  every  case  which  may  arise  in  the  multi- 
tude of  our  business  transactions  involving  the  use  and 
interpretation  of  negotiable  instniments.  In  any  case, 
however,  for  which  no  provision  is  made  in  the  Act  the 
authority  upon  which  our  disputes  are  to  be  settled  nmst 
still  be  sought  and  found  in  that  vast  collection  of  judi- 
cial decisions  upon  the  "principles  of  equity  and  usages 
of  trade,  which  general  convenience  and  a  common  sense 
of  justice  have  established  to  regiilate  the  dealings  of 
merchants  and  mariners  in  all  the  commercial  countries 
of  the  civilized  world" — the  Law  Merchant. 

1.     Mackintosh  vs.  Gibbs,  81  N.  J.  L.  577,  580. 

Gate  City  Nafl  Bk.  vs.  Schmidt,  168  Mo.  App.  153.  156. 


304  QUASI-NEGOTIABLE  INSTRUMENTS 

To  the  class  of  instruments  for  the  government  of 
which  we  must  yet  look  to  a  great  extent  to  the  uncodi- 
fied rules  of  the  Law  Merchant  and  to  other  statutes,  al- 
though they  possess  some  of  the  qualities  of  negotiability, 
belong,  bills  of  lading,  warehouse  receipts  and  certifi- 
cates of  stock.  These  are  called,  for  the  lack  of  a  bet- 
ter designation,  ''Quasi-Negotiable,"  that  is,  they  are 
negotiable  in  a  certain  sense  and  to  a  certain  degree  and 
I  shall  next  endeavor  to  explain  the  most  important  prin- 
ciples of  the  laws  by  which  they  are  governed. 


Quasi-negotiable  Instruments. 


In  the  following  treatments  of  the  Uniform  Bills  of 
Lading  Act  and  the  Uniform  AVarehouse  Receipts  Act  I 
will  use,  as  freely  as  possible,  the  language  of  these  Acts 
themselves.  References  will  be  made'  to  sections  of  these 
Acts  but  the  Acts  themselves  will  not  be  reprinted  in  this 
book.  To  do  so  would  be  mere  repetition  for  the  reason 
just  stated. 


The  law^s  which  govern  those  instruments  which  have 
to  some  extent  the  quality  of  negotiability  are  not  estab- 
lished with  such  uniformity  as  is  the  law  on  commercial 
paper  but  there  is  every  indication  that  acts  prepared  by 
the  conference  of  the  Commissioners  on  Uniformity  of 
State  Law^s  will  gradually  obtain  the  approval  of  all  or 
a  very  substantial  number  of  the  States  and  that  they 
will  is,  of  course,  greatly  to  be  desired.  Bills  of  Lading, 
Warehouse  Receipts  and  Certificates  of  Stock  are  closely 
allied  in  modern  commercial  use  to  promissory  notes  and 
bills  of  exchange.     The  first  two  represent  the  right  of 


BILLS  OF  LADING  305 

property  and  possession  in  goods,  the  last  an  undivided 
interest  in  the  assets  and  activities  of  corporations  and 
the  right  to  receive  a  proportionate  part  of  their  earn- 
ings and  to  participate  in  a  distribution  of  their  assets. 
Each  has  been  accorded  by  mercantile  custom  this  char- 
acteristic of  negotiability;  that  after  negotiation  for 
value  to  a  holder  in  due  course,  without  notice,  it  is  free 
from  such  defenses  as  are  involved  in  the  title  of  prior 
owners.  It  is  not  possible,  however,  to  state  any  general 
rule  or  theory  of  the  law  in  respect  to  all  of  these  in- 
struments for  each  has  an  origin  and  nature  of  its  own 
different  from  the  others  and  from  other  kinds  of  secur- 
ities. 

Bills  of  Lading. 
(The  references  are  to  sections  of  the  Uniform  Bills  of 

Lading  Act.) 

Bills  of  Lading,  which  are  transportation  receipts  for 
goods  shipped,  are  issued  by  railroads  or  other  com- 
Negotiable  bills  ^on  carriers  of  freight,  and  contain  an 
of  lading.  agreement  to  deliver  the  goods  described 

to  the  shipper  or  consignee  or  to  his  order.  They  are  a 
symbol  of  the  goods  which  they  represent  and  while  the 
goods  yet  repose  in  the  custody  of  the  carrier  the  bill  of 
lading  may,  as  the  evidence  of  their  ownership  and  exis- 
tence, be  the  subject  of  barter  and  sale. 

In  form  a  bill  of  lading  is  required  to  embody  within 
its  written  or  printed  terms  the  date  of  its  issue,  the 
What  must  name  of  the  person  from  whom  and  the 

'^'StraTghtBill";  pl^ce  where  the  goods  have  been  received, 
"Order Bill."  the  place  to  which  the  goods  are  to  be 
transported  and  a  statement  whether  the  goods  received 
will  be  delivered  to  a  specified  person  (called  a  "Straight 


mi  QUASI-NEGOTIABLE  INSTRUMENTS 

Bill),   or   to   his   order    (known   as   an   "Order    Bill"). 
(Sec.  1.) 

It  must  also  contain  a  description  of  the  goods,  or  the 
packages  containing  them,  and  be  signed  by  the  carrier  or 
its  agent.  (Sec.  1.)  The  carrier  may  insert  in  the  bill 
any  other  terms  or  conditions  consistent  with  its  real 
agreement  with  the  shipper  provided  they  shall  not  be 
contrary  to  law  or  public  policy,  and  shall  in  no  wise  im- 
pair its  obligation  to  exercise  that  degree  of  care  in  the 
transportation  of  the  goods  which  a  reasonably  careful 
man  would  exercise  in  regard  to  similar  goods  of  his 
own.  (Sec.  2.)  They  have  some  of  the  qualities  of  ne- 
gotiable instruments.  Their  principal  resemblance  to 
negotiable  commercial  paper  is  in  the  fact  that  when  a 
bill  of  lading  is  issued  in  which  it  is  stated  that  the  goods 
it  represents  are  consigned  or  destined  to  the  order  of 
the  person  named  in  the  bill,  it  is  transferable  by  the  con- 
signee or  his  transferee  and  any  subsequent  holder  ac- 
quires the  right  to  the  delivery  of  the  goods  and  to  bring 
an  action  upon  the  bill  in  his  own  name. 

Upon  the  liability  of  the  carrier  and  the  rights  of  the 

holder  of  a  negotiable  bill   of  lading  there  is  extreme 

conflict   of  opinion,  the  courts   of  many 

of  States  holding  and  persistently  announc- 

^^^s-  ing  views  directly  opposed  to  those  of  the 

courts  of  other  States.  For  the  sake  of  business  con- 
venience and  to  make  uniform  the  laws  of  all  the  States  a 
Bills  of  Lading  Act  was  prepared  by  the  Conference  of 
Commissioners  on  the  Uniformity  of  State  Laws  which 
is  now  effective  in  the  following  States:  Connecticut, 
Idaho,  Illinois,  Iowa,  Louisiana,  Maine,  Massachusetts, 
Maryland,  Michigan,  Minnesota,  Missouri,  New  Hamp- 
shire, New^  Jersey,  New  York,  Ohio,  Pennsylvania,  Rhode 
Island,  Vermont,  Washington  and  Wisconsin. 


BILLS  OF  LADING  307 

Radical  changes  in  the  laws  of  some  States  are  effected 
by  the  Act,  particularly  in  regard  to  the  liability  of  the 
carrier  when  the  issue  of  a  bill  of  lading  has  been,  pro- 
cured without  the  delivery  to  the  carrier  of  any  or  of  all 
of  the  goods  which  it  describes,  and  the  extent  to  which 
it  fixes  the  liability  of  the  carrier  to  a  holder  of  a  bill 
which  has  not  been  taken  up  and  cancelled  upon  delivery 
of  the  goods  to  the  consignee.  It  will  not  be  possible  to 
include  a  discussion  of  this  feature  of  the  Act  and  its  ef- 
fect within  this  article,  it  being  intended  merely  to  show 
the  nature  of  these  documents  and  explain  some  of  their 
features  of  negotiability. 

At  the  suggestion  and  upon  the  recommendation  of 
the  Senate  Committee  on  Interstate  Commerce  that  it 
be  enacted,  a  bill  to  make  applicable  to  interstate  ship- 
ments the  provisions  of  the  uniform  Act  prepared 
by  the  Conference  of  the  Commissioners  on  Uniform- 
ity of  State  law^s  was  recently  passed  by  the  Congress 
of  the  United  States.  The  Act  now  governs  bills  of 
lading  issued  for  interstate  shipments,  and  its  speedy 
adoption  by  all  of  the  States  will,  in  all  probabil- 
ity, be  assured.  Should  the  States  which  have  not  yet 
embraced  the  Act  continue  to  decline  to  do  so,  it  would 
appear,  from  hearings  had  before  the  Interstate  Com- 
merce Commission,  the  99%  of  all  commodities  shipped 
would  nevertheless  be  carried  upon  bills  of  lading  which 
will  l)e  subject  to  the  provisions  of  this  Act.  It  would 
seem  reasonably  proper  then  that  this  analysis  of  the  law 
upon  the  subject  be  confined  to  the  consideration  of  the 
Uniform  Act. 

Negotiable  bills  issued  for  the  transportation  of  goods 
to  any  place  in  the  United  States  on  the  continent  of 
May  not  be  North   America,   excepting  Alaska,   may 

io'what''  '^*^'      not,  under  the  Uniform  Act,  be  issued  in 
countries.  sets.    If  they  are  the  carrier  issuing  them 


308  QUASI-NEGOTIABLE  INSTRUMENTS 

will  be  liable,  under  that  Act,  for  failure  to  deliver  the 
goods  they  describe  to  anyone  who  purchases  a  part  of 
the  bill  for  value  in  good  faith,  even  if  the  purchase  be 
made  after  the  delivery  of  the  goods  by  the  carrier  to  a 
holder  of  one  of  the  other  parts  of  the  bill.     (Sec.  5.) 

The  negotiation  of  the  bill  may  be  by  special  indorse- 
ment to  a  specified  person  or  by  endorsement  in  blank. 

Negotiable  by  (Sec.  18.)  A  special  endorsement  speci- 
indorsement  or      ^^        j.i  i?  xi  j.         i 

delivery.  ^^^  ^"^^  name  oi  the  person  to  whom  or 

to  whose  order  the  goods  are  to  be  transferred,  while  a 
blank  endorsement  specifies  no  endorsee  and  under  it 
the  goods  are  deliverable  to  the  bearer  of  the  bill.  The 
bill  may  also  be  transferred  by  delivery  when  accom- 
panied by  an  express  or  implied  agreement  to  transfer 
the  title  to  the  goods  which  it  represents.  (Sec.  29.) 
The  indorsement  of  the  bill  does  not  make  the  indorser 
liable  for  any  failure  on  the  part  of  the  carrier  and  pre- 
vious indorsers  to  fulfill  their  respective  obligations. 
(Sec.  35.) 

But  no  bill  of  lading  is  negotiable  unless  it  expressly 
states  that  the  goods  it  represents  are  destined  or  con- 
^.      ,  .„  signed  to  the  order  of  the  specified  per- 

negotiable.  son  whom  it  names.     And  if  the  bill  con- 

tains words  of  negotiability,  that  is,  if  it  states  that  the 
goods  are  deliverable  to  the  person  named  or  his  order, 
it  is  held,  upon  the  best  authority,  to  be  negotiable  not- 
withstanding any  provision  in  the  bill  to  the  contrary. 
(Sec.  4.)  Its  negotiable  character  is  not  affected  by  the 
fact  that  it  names  a  person  who  is  to  be  notified  of  the 
arrival  of  the  goods  and  the  fact  that  it  names  such  a 
person  is  not  notice  to  a  purchaser  of  the  bill  that  he  has 
or  may  have  any  rights  or  equities  in  the  goods  which 
it  represents.     (Sec.  8.) 


BILLS  OF  LADING  309 

The  carrier,  m  the  absence  of  some  kiwful  excuse,  is 
obliged  to  deliver  the  goods  described  in  the  bill  upon  a 
When  carrier  demand  made  either  by  the  consignee  or 
goods^  *°  '^'"''®'  l^y  the  holder  of  the  bill,  if  it  has  been 
negotiated,  upon  his  offer  to  satisfy  the  carrier's  lawful 
claims  against  the  goods,  to  surrender  the  bill  properly 
indorsed  and  to  sign  an  acknowledgment  that  the  goods 
have  been  delivered  if  requested  to  do  so  by  the  carrier. 
(Sec.  10.)  But  a  carrier  is  not  obliged  to  deliver  and  not 
.iustified  in  delivering  the  goods  to  an  unpaid  seller  un- 
less the  bill  is  first  surrendered  for  cancellation.  (Sec. 
10.) 

The  carrier  is  justified  in  delivering  the  goods  rep- 
resented by  a  negotiable  bill  to  the  person  in  whose  pos- 
Carrier  liable  session  it  is  if  by  its  terms  they  are  de- 
delivl^.''^^'^  liverable  to  him,  or  if  he  holds  the  bill  un- 
der a  special  indorsement  by  the  consignee  or  an  in- 
dorsement in  blank  by  him  or  by  his  mediate  or  imme- 
diate indorsee,  or  it  is  transferable  by  delivery.  (Sec. 
11.)  This  is  subject  to  the  qualification,  however,  that 
the  carrier  has  not,  prior  to  making  actual  delivery,  been 
requested  ])y  or  on  behalf  of  a  person  having  a  right  of 
property  or  possession  in  the  goods  to  withhold  such  de- 
livery, or  had  information  at  the  time  of  delivery  that 
it  w^as  to  a  person  not  lawfully  entitled  to  their  posses- 
sion. (Sec.  11.)  Such  a  request  must  have  been  made 
or  such  information  given,  to  be  effective,  to  an  officer 
or  agent  of  the  carrier  whose  actual  or  apparent  duties 
include  the  power  to  act  upon  it,  and  it  must  be  made  or 
given  in  time  to  enable  him  to  w^hom  it  is  given  to  act 
with  reasonable  diligence  to  stop  delivery  of  the  goods. 
(Sec.  11.)  But  when  a  negotiable  bill  has  been  issued  no 
seller's  lien  or  right  of  stoppage  in  transitu  will  affect 
or  defeat  the  rights  of  any  purchaser  for  value  in  good 


310  QUASI-NEGOTIABLE  INSTRUMENTS 

faith  to  whom  the  bill  has  been  negotiated,  (Sec.  41.) 
This  is  so  even  if  the  negotiation  has  been  subsequent  to 
the  notice  to  the  carrier  of  the  seller's  claim  to  the  goods, 
or  that  he  claims  a  lien  upon  them  or  claims  the  right 
of  stoppage  in  transitu.     (Sec.  41.) 

Must  take  up  Upon  delivery  of  the  goods  the  carrier 

and  cancel  bill,  must  take  up  and  cancel  the  negotiable 
bill  and  if  he  fails  to  do  so  he  will  be  liable  to  any  one 
who  in  good  faith  purchases  the  bill  for  value,  whether 
the  purchaser  acquired  title  to  the  bill  before  or  after 
such  delivery,  and  notwithstanding  the  fact  that  the  goods 
were  delivered  to  the  person  entitled  to  their  possession. 
(Sec.  13.) 

,r»  .•  ,  J  V  -„  If  the  delivery  is  of  part  only  of  the 
Partial  delivery.  j  t-  j 

goods  the  carrier  must  either  take  up  and 
cancel  the  bill  or  plainly  write  upon  it  a  statement  that  a 
partial  delivery  has  been  made,  describing  the  goods  or 
packages  delivered  or  the  part  which  still  remain  in  its 
possession.  (Sec.  14.)  If  it  fails  to  do  so  the  carrier 
will  be  liable  for  its  failure  to  deliver  all  the  goods  speci- 
fied in  the  bill  to  any  one  who  in  good  faith  and  for  value 
purchases  the  Ijill,  whether  he  accjuires  title  to  it  before 
or  after  such  partial  delivery  and  notwithstanding  the 
delivery  was  made  to  the  ]ierson  entitled  to  their  posses- 
sion.   (Sec.  14.) 

.,        .  If  the  bill  is  altered  or  an  erasure  or 

Alteration  „        .      . 

of  bill.  addition  is  made  in  it  after  its  issue  with- 

out the  written  authority  of  the  carrier,  or  unless  its 
authority  is  noted  on  the  bill,  the  alteration,  erasure  or 
addition  is  void  and  the  bill  will  be  enforceable  according 
to  its  original  effect.     (Sec.  15.) 

If  a  negotiable  bill  is  lost  or  destroyed 

the  owner  of  the  goods  for  which  it  was 

issued  can  only  obtain  their  delivery,  without  the  carrier's 


BILLS  OF  LADING  :ni 

consent,  by  the  aid  of  a  competent  court  whose  order 
nnist  re<iuire  liim  to  indemnify  the  carrier  or  any  person 
injured  by  the  delivery  against  liability  or  loss  by  reason 
of  the  original  bill  remaining  outstanding.  (Sec.  16.) 
Even  upon  such  an  order  the  carrier  will  not  be  relieved 
of  liability  to  a  jjerson  to  whom  the  negotiable  bill  has 
been  negotiated  for  value  without  notice  of  the  proceed- 
ings or  the  delivery  of  the  goods,  but  must  respond  to 
him,  relying  for  recourse  upon  its  indemnity. 

If  more  than  one  person  claims  title  to 
Interpleader.  ^j^^^  goods  or  the  carrier  has  notice  that 

some  one  other  than  the  person  in  possession  of  the  l)ill 
of  lading  claims  them,  it  may  require  all  claimants  to  in- 
ter])lead  or  may  itself  bring  an  action  for  this  purpose. 
(Sec.  19.) 

^.  ,.,..       »  The  carrier  will  be  liable  to  the  holder 

Liability  oi 

carrier  when  of  a  negotiable  bill  who  has  given  value 

Sf^llo™  for  it.  relying  in  good  faith  upon  its  de- 
receipt  of  goods,  scription  of  the  goods  which  it  represents, 
correspond  to  ^^  ^^^^  extent  of  any  damage  he  may  suf- 
description.  fer  by  the  non-receipt  of  all  or  part  of 

the  goods  or  by  their  failure  to  correspond  to  their 
description  in  the  bill  at  the  time  of  its  issue,  even  if  none 
of  the  goods  were  delivered  to  the  carrier.     (Sec.  22.) 

The  carrier,  however,  will  not  be  liable  for  the  failure 
to  deliver  goods  of  the  kind  and  quantity  described  in 
the  bill  of  lading  if  they  are  described  in  the  bill  merely 
by  a  statement  of  the  marks  or  labels  upon  them,  or  upon 
the  packages  in  which  they  are  contained.  (Sec.  22.) 
Nor  will  it  be  liable  if  the  bill  states  that  the  goods  are 
said  to  be,  or  the  packages  are  said  to  contain,  goods  of 
a  certain  kind  or  quality,  or  in  a  certain  condition,  or  if 
it  contains  a  statement  that  the  condition  of  the  goods 
or  contents  of  the  packages  are  unknown  to  the  carrier, 
or  words  of  like  purport.     (Sec.  22.) 


312  QUASI-NEGOTIABLE  INSTRUMENTS 

When  the  goods  are  loaded  by  the  ship- 
Exception  when  ,  .  .         X  •     J.1      1  -n  i.1- 
"shipper's  load     per  the  carrier  may  insert  m  the  bill  the 

and  count."  words   "Shipper's  load  and  count,"   or 

other  words  of  like  import,  and,  if  this  statement  is  true, 
it  will  not  then  be  liable  for  any  damages  resulting  from 
the  improper  loading  or  the  misdescription  of  the  goods 
represented  by  the  bill,  or  the  holder's  failure  to  receive 
all  that  are  described,  unless  there  has  been  loss  or  dam- 
age in  transit  for  w^hich  it  would  be  responsible  if  due 
to  some  negligence  of  its  own.     (Sec.  22.) 

-T  ^         .    ,  ^  The  carrier  cannot  be  compelled  to  de- 

Not  rectuired  to 

deliver  unless  bill  liver  the  goods  described  in  the  bill  until 
STor'cha^ges.  ^^  ^s  surrendered  or  the  goods  are  im- 
pounded by  a  court.  (Sec.  23.)  It  has  no  lien  upon  the 
goods  except  for  freight,  storage  and  other  charges  inci- 
dental to  the  transmission  of  the  very  goods  described 
in  the  bill,  unless  the  bill  expressly  states  for  what  other 
charges  a  lien  may  be  claimed.  (Sec.  25.)  It  is  not 
liable  to  the  holder  of  the  l)ill  of  lading  for  delivery  after 
the  goods  have  been  sold  to  satisfy  its  lien,  or  because 
they  have  not  been  claimed,  or  are  perishable,  or  hazard- 
ous, even  if  the  bill  is  negotiable.     (Sec.  26.) 

.  Every  person  to  whom  a  negotiable  bill 

the  transferee.  of  lading  has  been  negotiated  acquires 
whatever  title  to  the  goods  his  transferor  had  or  could 
convey  and  such  title  as  the  consignee  and  consignor  had 
or  had  power  to  convey  to  a  purchaser  in  good  faith. 
(Sec.  31.)  He  also  acquires  the  direct  obligation  of  the 
carrier  to  hold  the  goods  for  him  according  to  the  terms 
of  the  bill.  (Sec.  31.)  If  the  bill  is  transferred  but  not 
negotiated  to  the  holder,  the  transferee  acquires  with  the 
transfer,  as  against  the  transferor,  the  title  to  the  goods 
sul)ject  to  the  terms  of  any  agreement  between  them. 
(Sec.  32.) 


BILLS  OF  LADING  313 

To  negotiate  the  bill  means  to  transfer  it  from  one 
person  to  another  in  such  a  manner  as  to  make  the  trans- 
feree the  owner  of  the  property  in  the -goods  which  it 
represents.  Courts  have  never  been  willing  to  give  the 
bills  of  lading  the  same  quality  or  degree  of  negotiability 
which  is  accorded  the  bills  of  exchange  and  notes,  in  fact, 
they  have  expressly  denied  it.  Their  principal  attributes 
of  negotiability,  with  the  acknowledged  limitations  upon 
them,  are,  however,  admitted  to  be  as  follows : 

Right  to  require  If  the  transfer  of  a  negotiable  bill  is 
indorsement.  made  for  value  by  delivery  and  its  en- 
dorsement by  the  transferor  is  necessary  for  negotia- 
tion, the  transferee  may  compel  the  transferor  to  in- 
dorse the  bill  unless  it  appears  that  its  indorsement  was 
not  intended.  (Sec.  33.)  The  negotiation  is  regarded  as 
taking  effect  at  the  time  when  the  indorsement  is  actually 
made  and  in  the  interval  the  title  of  the  transferee  is  ex- 
posed to  equitable  defenses  and  adverse  claims  w^hich 
may  be  asserted  against  the  transferor.     (Sec.  33.) 

Anyone  who  negotiates  or  transfers  a 
l^do'JsemU^r  bill  of  lading  for  value  by  indorsement  or 
delivery.  delivery,  including  one  who  assigns  for 

value  a  claim  secured  by  a  bill,  warrants,  unless  the  con- 
trary is  made  to  appear,  that  the  bill  is  genuine,  that  he 
has  a  legal  right  to  transfer  it  and  that  he  has  no  know^l- 
edge  of  any  fact  which  would  impair  the  validity  or  value 
of  the  bill.  (Sec.  34.)  He  also  warrants  that  he  has  a 
right  to  transfer  the  title  to  the  goods  it  represents  and 
he  warrants  that  the  goods  are  merchantable  or  fit  for  the 
particular  purpose  for  which  they  are  intended,  provided 
that  these  warranties  would  be  implied  if  the  goods  them- 
selves had  been  transferred  under  a  contract  between 
the  parties  without  the  bill.  (Sec.  34.)  In  the  case  of 
an  assignment  of  a  claim  secured  by  a  blil,  the  liability 


314  QUASI-NEGOTIABLE  INSTRUMENTS 

of  the  assignor,  upon  his  warranty,  will  not  exceed  the 

amount  of  the  claims  to  secure  which  the  bill  is  assigned. 

(Sec.  34.) 

One  who  indorses  a  bill  of  lading  is  not 

liable  for  liable  for  the  failure  of  the  carrier  or  any 

obligations  of        previous  indorsers  to  fulfill  their  obliga- 

previous 

indorsers  or  tions  (Sec.  35)  and  if  one  who  holds  the 

carrier.  ]-,-jj  ^g  security,  either  as  mortgagee  of 

the  goods  it  respresents  or  as  pledgee,  demands  and 
receives  payment  of  the  debt  for  which  it  is  security  he 
is  not  deemed  to  represent  or  warrant  the  genuineness 
of  the  bill  or  the  quantity  or  quality  of  the  goods  it  de- 
scribes.   (Sec.  30.) 

The  Bills  of  Lading  Act,  endeavoring 
Rights  of  holder   ,  .  .,   ,  ,  a-  4.       ^^ 

without  notice  of  to  overcome  irreconcilable  coimict,  pro- 
fraud,  etc.  ^j(jgs  ^i^^i  if  tije  bill  is  obtained  or  nego- 
tiated by  accident,  fraud,  duress,  in  breach  of  faith,  or  is 
wrongfully  converted  by  the  holder  and  afterward  nego- 
tiated to  a  subsequent  holder  in  good  faith  for  value 
and  without  notice,  the  title  of  such  subsequent  holder  is 
not  affected  thereby  and  the  validity  of  the  bill  not  there- 
by impaired.  (Sec.  37.)  It  provides  further  that  if  one 
continues  in  possession  of  a  negotiable  bill  which  has 
been  issued  by  a  carrier  for  goods  in  his  possession  and 
which  have  been  sold,  mortgaged  or  pledged,  and  he  sub- 
sequently negotiates  the  bill  to  one  who  in  good  faith 
takes  it  for  value,  without  notice  of  the  previous  sale  of 
the  goods,  the  holder  will  obtain  with  his  purchase  of  the 
bill  the  title  to  the  goods  it  represents  as  fully  as  if  the 
first  purchaser  of  the  goods  had  expressly  authorized  the 
subsequent  negotiation  of  the  bill.    (Sec.  38.) 

Neither  of  these  provisions  can,  however,  be  stated 
to  be  the  law  generally,  for  upon  both  there  is  a  marked 
division  of  opinion  furnishing  the  very  best  reason  why 


BILLS  OF  LADING  315 

either  the  rule  favored  by  the  Act  or  that  announced  by 
those  courts  holding  the  contrary  ought  to  be  universally 
adopted  for  the  sake  of  uniformity. 

When  a  bill  is  issued  which  indicates 
lYdt'ef  as  to  that  the  goods  it  represents  are  deliver- 
ownership  of  able  by  the  carrier  to  the  buyer  or  his 
^°°^^-  order,  or  his  agent,  its  issu-e  is  deemed  to 

be  a  transfer  of  the  property  in  the  goods  and  the  right 
to  their  possession  in  the  buyer  if  the  bill  is  delivered 
to  him.  (Sec.  39.)  But  if  the  bill  is  retained  by  the 
seller  or  his  agent  he  thereby  reserves  his  right  to  pos- 
session of  the  goods  and  if  they  are  deliverable  to  the 
seller  or  his  agent,  or  his  own  or  his  agent's  order,  the 
seller  thereby  reserves  his  ownership  of  the  goods  unless, 
except  for  the  form  of  the  bill,  the  property  would  have 
passed  to  the  buyer  upon  shipment  of  the  goods.  (Sec. 
39.)  In  that  event  the  seller's  ownership  of  the  goods 
will  be  deemed  to  be  only  for  the  purpose  of  securing  the 
performance  by  the  buyer  of  his  obligations  under  his 
contract  with  the  seller.    (Sec.  39.) 

Draft  with  bill  of  ^^hen  the  seller  of  goods  draws  upon 
lading  attached,  the  buyer  and  transmits  the  draft  to- 
gether with  the  bill  of  lading  to  the  buyer  for  the  purpose 
of  obtaining  its  acceptance  or  pajTuent,  the  buyer  is 
bound  to  return  the  bill  of  lading  to  the  seller  if  he  does 
not  accept  or  pay  the" draft.  (Sec.  39.)  If ,  however,  the 
bill  of  lading  provides  that  the  goods  are  deliverable  to 
the  buyer  or  to  his  order,  or  if  it  is  indorsed  to  him  or 
indorsed  in  blank  by  the  seller  consignee,  and  the  buyer 
fails  to  return  it  but  negotiates  the  bill  of  lading,  one 
who  takes  it  in  good  faith,  for  value  without  notice  of  its 
wrongful  negotiation,  or  who  purchases  the  goods  with- 
out notice  of  their  wrongful  sale,  will  obtain  a  good  title 
to  the  bill  and  the  goods,  notwithstanding  that  the  seller's 


316  QUASI-NEGOTIABLE  INSTRUMENTS 

draft  which  the  bill  accompanied  was  not  honored.  (Sec. 
39.) 

What  intention  If  the  seller  of  goods  draws  on  the 
assumed.  buyer  with  bill  of  lading  attached,  either 

directly  or  through  a  bank  or  other  agency,  it  is  deemed, 
in  the  absence  of  an  agreement  to  the  contrary,  as  fol- 
lows: 

That  if  the  draft  is  by  its  terms  or  legal  effect  payable 
on  demand  or  at  sight,  or  not  more  than  three  days 
thereafter,  the  parties  interested  are  justified  in  assum- 
ing that  the  seller  intended  to  require  payment  of  the 
draft  before  the  buyer  should  be  entitled  to  receive  or  re- 
tain the  bill,  and  it  must  not  be  delivered  up  to  the  buyer 
until  he  pays  the  draft.  If  the  draft  is  payable  at  a 
time  more  than  three  days  after  demand,  sight  or  presen- 
tation, it  is  deemed  that  the  seller,  in  the  absence  of  a 
different  express  agreement  or  of  instructions,  intended 
to  require  acceptance  but  not  payment  of  the  draft  before 
the  buyer  should  be  entitled  to  receive  or  retain  the  bill 
of  lading.  Upon  the  acceptance  of  the  draft  the  bill  of 
lading  may  be  delivered  to  the  buyer.     (Sec.  40.) 

Duplicate  bills  are  sometimes  issued 
Duplicate  bills.  ^^^  when  more  than  one  negotiable  bill  is 
issued  by  the  carrier  for  the  same  goods  it  is  required 
that  the  word  ''Duplicate"  or  some  other  word  or  words 
indicating  that  the  document  is  not  an  original,  shall  be 
stamped  or  written  plainly  upon  the  face  of  every  one 
except  the  first  one  issued.  (Sec.  6.)  If  the  carrier  fails 
to  so  mark  any  and  every  duplicate  bill  it  will  be  liable 
for  any  damage  caused  by  its  failure  to  do  so  to  anyone 
who  purchases  as  an  original  a  duplicate  bill  not  so 
marked,  even  if  the  purchase  be  made  after  the  delivery 
of  the  goods  to  the  holder  of  the  original  bill.     (Sec.  6.) 


BILLS  OF  LADING  317 

A   bill   of   lading   which   is   issued  by   a 

«T.  !f<t^^?!„'^+^^oT,io  carrier  and  which  is  not  intended  to  be 
or  noii-negotiable 

bill  must  be  so  negotiable  is  called  a  "Straight  Bill"  and 
must  have  plainly  stamped  or  written 
upon  it  by  the  carrier  the  word  ''Non-negotiable"  or 
"Not  negotiable",  unless  what  purports  to  be  the  bill  is 
a  mere  memorandum  or  acknowledgment  of  an  informal 
character.     (Sec.  7.) 

Penalties  f  ^^  ^^^  States  provision  is  made  in  the 

fraud.  laws  upon  the  subject  of  bills  of  lading 

against  fraud  in  their  issue,  and  severe  penalties  are  im- 
posed upon  any  officer,  agent,  or  servant  of  a  carrier 
who  issues,  or  aids  in  issuing,  a  false  or  fraudulent  bill. 
Severe  penalties  are  also  imposed  upon  all  persons  who 
fraudulently  alter  or  negotiate  bills  of  lading,  or  procure 
the  transfer  of  the  goods  or  the  bill  without  title  or  with 
intent  to  defraud,  or  w^rongfully  procure  the  issue  of  a 
fraudulent  bill  by  a  carrier. 

In  substance,  the  foregoing  is  an  analysis  of  the  prin- 
cipal provisions  of  the  Uniform  Act  upon  the  subject  of 
bills  of  lading  now  in  effect  in  the  States  I  have  men- 
tioned and,  either  by  other  statute  or  judicial  interpreta- 
tion of  the  Law  Merchant,  in  nearly  all  the  others.  It 
will  be  of  advantage  to  men  engaged  in  business  to  know 
the  substance  of  this  Act  and  you  will  observe  that  in 
a  great  many  respects,  as,  for  example,  upon  the  sub- 
jects of  indorsement  and  transfer,  warranties,  and  to 
determine  when  and  under  what  circumstances  a  holder 
acquires  title  to  the  bill  free  from  imperfections,  the  pro- 
visions of  the  Uniform  Negotiable  Instruments  Act  bear 
a  close  analogy  to  this  one  and  are  useful  to  a  proper 
understanding  of  the  law  upon  this  subject.  References 
to  the  former  are  omitted  from  this  analysis  of  the  Bills 
of  Lading  Act  but  they  readily  suggest  themselves  in  the 


318  QUASI-NEGOTIABLE  INSTRUMENTS 

use  of  terms  common  to  both  and  I  suggest  that  the 
reader  consult  the  index  freely  and  refer  to  the  explana- 
tions to  be  found  under  appropriate  sections  of  the  Uni- 
form Negotiable  Instruments  Act.  He  must  bear  in 
mind,  however,  that  a  bill  of  lading  is  merely  a  symbol 
of  the  existence  en  route,  in  the  custody  of  the  carrier, 
of  the  merchandise  for  which  it  is  issued  and  that  such 
an  instrument  is  not  as  fully  negotiable  as  is  commercial 
paper  representing  transactions  in  money  rather  than 
goods,  and  that,  being  quasi  negotiable,  bills  of  lading 
are  not  wholly  governed  by  the  laws  which  govern  com- 
mercial paper  and  do  not  possess  all  of  the  attributes  of 
negotiable  instruments. 

When  the  goods  arrive  at  their  destination,  unless  they 
are  immediately  required  for  sale  or  consumption,  they 
are  usually  warehoused.  As  an  evidence  of  their  exist- 
ence a  receipt  is  issued  and  I  shall  next  endeavor  to 
explain  in  what  respects  and  to  what  extent  this  receipt 
is  negotiable,  and  the  rights,  duties  and  liabilities  of  the 
parties  to  a  warehouse  receipt. 


Wabehouse  Eeceipts. 


(The  references  are  to  sections  of  the  Uniform  Ware- 
house Receipts  Act.) 


_     ^  In  fortv  States   and  in  the  District  of 

Warehouse  -  ,,  ^      a    • 

receipts.  Columbia,     being    all     except    Arizona, 

Georgia,  Indiana,  Kentucky,  Mississippi,  New  Hamp- 
shire, South  Carolina  and  Texas,  the  Uniform  Ware- 
house Eeceipts  Act,  prepared  and  recommended  by  the 
Conference  of  the  Commissioners  on  the  Uniformity  of 
State  Laws,  is  in  effect.     It  was  enacted  for  the  pur- 


WAREHOUSE  RECEIPTS  319 

pose  of  making  uniform  the  laws  of  all  of  the  States 
upon  this  subject  and  very  concisely  and  clearly  states 
the  law  which  governs  the  issue  and  negotiation  of  re- 
ceipts for  the  storage  of  goods  with  public  warehouse- 
men. 

^  ^  .  .        .  A  warehouse  receipt  is  a  written  ac- 

Defimtion  of  ,  ,      ,,  ,  ^.i    x 

warehouse  knowledgment  by  the  warehouseman  that 

receipts.  ^le  holds  certain  goods  in  store  for  the 

person  to  whom  it  is  issued.  It  may  be  issued  for  goods 
deposited  with  the  warehouseman  by  their  owner  and  in 
many  States  for  goods  of  which  he  is  himself  the  owner. 
In  the  absence  of  any  special  agreement  imposing  other 
obligations  upon  the  warehouseman,  the  doposit  of  goods 
with  him  for  storage  and  his  issue  of  a  receipt  for  them 
establishes  his  relation  to  the  owner  of  the  goods  as 
that  of  a  bailee  and  he  is  bound  to  exercise  ordinary  care 
in  keeping  them,  to  afford  the  owner  reasonable  oppor- 
tunities of  access  to  his  goods  and  to  deliver  them  upon 
the  terms  of  the  receipt  which  he  issues  as  an  evidence 
that  they  are  in  his  custody. 

This  receipt  is  not  required  to  be  in  any 
warehouse  particular  form  but  every  warehouse  re- 

receipt,  ceipt  must  embody  within  its  written  or 

printed  terms  the  location  of  the  warehouse  where  the 
goods  are  stored,  the  date  of  its  issue,  its  consecutive 
number  and  a  statement  whether  the  goods  will  be  de- 
livered to  the  bearer,  to  a  specified  person  or  to  a  speci- 
fied person  or  his  order.     (Sec.  2.) 

It  must  also  express  the  rate  of  storage  charges,  con- 
tain a  description  of  the  goods  for  which  it  is  issued  or 
the  packages  in  which  they  are  contained  and  must  be 
signed  by  the  warehouseman  or  his  authorized  agent. 
(Sec.  2.)  If  the  receipt  is  issued  for  goods  of  which  the 
warehouseman  is  the  owner,  either  solely  or  jointly  or 


320  QUASI-NEGOTIABLE  INSTRUMENTS 

in  common  with  otiiers,  these  facts  must  be  stated  in 
the  receipt  and  it  must  also  contain  a  statement  of  any 
advances  made,  or  liability  incurred  by  him  toward  the 
goods  stored  for  which  he  claims  a  lien.  If  the  precise 
amount  of  his  advances  or  liabilities  incurred  is  unknown 
to  the  warehouseman,  or  to  his  agent,  at  the  time  the 
receipt  is  issued,  his  statement  upon  the  receipt  that  ad- 
vances have  been  made  or  liabilities  incurred  will  be 
sufficient  if  he  states  for  what  purpose  they  were  made 
or  incurred.     (Sec.  2.  ) 

If  any  of  the  foregoing  requirements  are  omitted  from 
a  negotiable  receipt  the  warehouseman  will  be  liable  for 
all  damages  caused  by  their  omission.  (Sec.  2.)  He  may 
insert  in  his  receipt  any  other  terms  or  conditions  which 
express  the  terms  upon  which  he  receives  the  goods,  pro- 
vided they  shall  not  be  contrary  to  law  or  in  any  wise 
impair  his  obligation  to  exercise  that  degree  of  care  in 
the  safekeeping  of  the  goods  entrusted  to  him  which  a 
reasonably  careful  man  would  exercise  in  regard  to  sim- 
ilar goods  of  his  own.    (Sec.  3.) 

Non-negotiable  "^^^  receipts  which  may  be  issued  by  the 

receipts.  warehouseman  may  be  either  non-nego- 

tiable or  negotiable.  One  in  which  it  is  stated  that  the 
goods  it  describes  will  be  delivered  to  the  depositor,  or 
to  any  other  person,  is  a  non-negotiable  receipt.  (Sec.  4.) 
Such  a  receipt  must  have  plainly  written  or  stamped  on 
its  face  by  the  warehouseman  issuing  it  the  words  :  ''Non- 
negotiable"  or  "Not  negotiable,"  and  if  he  fails  to  mark 
it  so  anyone  purchasing  it  for  value,  supposing  it  to  be 
negotiable,  may  at  his  option  treat  it  as  imposing  upon 
the  warehouseman  the  same  obligations  as  if  it  had  been 
negotiable,  unless  what  purports  to  be,  or  is  claimed  to 
be  a  warehouse  receipt  is  a  letter,  or  memorandum,  or 
other  written  agreement  of  an  informal  character. 
(Sec.  7.) 


WAREHOUSE  RECEIPTS  321 

Negotiable  ^  negotiable  receipt  must  contain  the 

receipt.  statement  that  the  goods  received  will  be 

delivered  to  the  bearer  or  to  the  order  of  any  specified 
person.  (Sec.  5.)  If  such  a  receipt  contains  in  addi- 
tion a  provision  that  it  is  non-negotiable  this  additional 
provision  is  void  and  notwithstanding  it  the  receipt  is 
deemed  to  be  negotiable.     (Sec.  5.) 

Duplicate  When  more  than  one  negotiable  receipt 

receipt.  ig  issued  by  a  warehouseman  for  the  same 

goods  the  word  '* Duplicate"  must  be  plainly  written  or 
stamped  upon  every  one  except  the  first  one  issued,  and 
the  warehouseman  who  fails  to  do  so  will  be  liable  for 
any  damage  or  loss  suffered  by  anyone  who  purchased 
the  subsequent  receipt  for  value,  supposing  it  to  be  an 
original,  even  if  he  purchased  it  after  the  delivery  of  the 
goods  by  the  warehouseman  to  the  holder  of  the  original 
receipt.  (Sec.  6.)  A  receipt  upon  the  face  of  which  the 
word  ''duplicate"  is  plainly  placed  is  considered  to  be 
a  representation  and  warranty  by  the  warehouseman 
that  it  is  an  accurate  copy  of  an  original  receipt  properly 
issued  and  uncancelled  at  the  date  when  the  duplicate  was 
issued,  but  it  imposes  upon  him  no  other  liability.  (Sec. 
15.) 

In  the  absence  of  some  lawful  excuse 
mus't'^divS^''  the  warehouseman  is  bound  to  deliver 
goods  to  holder  the  goods  represented  by  the  receipt  to 
0    receip  .  .^^  holder  or  to  the  depositor  of  the  goods^ 

upon  demand.  (Sec.  8.)  He  must  require  that  the  de- 
mand shall  be  accompanied  by  an  offer  to  satisfy  his  lien 
for  advances  and  charges,  to  surrender  the  receipt,  if 
negotiable,  with  such  indorsements  as  would  be  neces- 
sary for  its  negotiation  into  the  possession  of  the  person 
making  the  demand,  in  order  to  show  that  he  is  entitled 
to  delivery  of  the  goods,  and  that  the  person  making  the 


322  QUASI-NEGOTIABLE  INSTRUMENTS 

demand  shall  sign  an  acknowledgment  that  the  goods 
have  been  delivered.     (Sec.  8.) 

Ligjj  Qf  If  a  negotiable  receipt  is  issued  for  the 

warehouseman.  goods  the  warehouseman  will  be  entitled 
to  a  lien  uj^on  them,  or  their  proceeds  if  sold,  only  for 
charges  for  storage  of  the  goods  for  which  the  receipt 
is  issued  accruing  from  the  date  of  the  receipt,  unless  it 
plainly  specifies  other  charges  for  which  a  lien  is  claimed. 
(Sec.  30.)  In  that  case  the  warehouseman  will  be  en- 
titled to  a  lien  upon  the  goods  or  their  proceeds  for  the 
charges  enumerated  in  the  receipt  if  they  are  lawful 
charges  for  the  storage  and  preservation  of  the  goods  it 
describes,  for  money  advanced,  interest,  insurance, 
transportation,  weighing,  coopering  and  other  reason- 
able charges  and  expenses  in  relation  to  them.  (Sec.  27.) 
He  is  also  entitled  to  a  lien  for  charges  and  expenses  for 
notice  and  advertisements  of  sale  and  for  the  sale  of  the 
goods,  if  default  has  been  made  in  satisfying  his  ordinary 
charges.     (Sec.  27.) 

A  warehouseman  having  a  valid  lien  against  the  per- 
son demanding  the  goods  may  refuse  to  deliver  them 
to  him  until  his  lien  is  satisfied.  (Sec.  31.)  He  is  en- 
titled to  all  of  the  remedies  provided  by  any  law  in 
favor  of  a  creditor  against  his  debtor  for  the  collection 
from  the  depositor  of  the  goods  of  all  charges  and 
advances- which  the  depositor  has  expressly  or  impliedly 
contracted  with  the  warehouseman  to  pay,  and  is  not  re- 
quired to  have  recourse  first  or  alone  to  the  goods  in  his 
possession  to  collect  his  claim.     (Sec.  32.) 

The  warehouseman  will  lose  his  lien 
upon  the  goods  by  surrendering  their  pos- 
session without  first  requiring  the  payment  of  his  lawful 
claims  against  them,  or  by  refusing  to  comply  with  a  law- 
ful demand  for  their  delivery.     (Sec.  29.)     Such  a  de- 


WAREHOUSE  RECEIPTS  323 

mand  must,  of  course,  be  accompanied  by  an  offer  to 
comjjly  with  the  requirements  which  I  have  already 
stated  must  be  met,  before  the  warehouseman  can  be 
compelled  to  deliver  the  goods  to  the  depositor  or  holder 
of  the  bill.  (Sec.  8.)  His  lien  on  the  goods  will  not  be 
revived  if  they  are  subsequently  redeposited  with  him. 

He  may  enforce  his  lien  again  the  goods  deposited  with 
him  belonging  to  the  debtor  for  the  claims  in  regard  to 
which  the  lien  is  asserted,  and  may  enforce  it  against 
goods  belonging  to  other  persons  deposited  at  any  time 
by  the  person  who  is  liable  for  his  claims,  provided  the 
person  who  deposited  goods  belonging  to  others  had  such 
possession  of  them  that  a  pledge  of  them  by  him  at  the 
time  of  their  deposit  to  one  who  took  the  goods  in  good 
faith  would  have  been  valid.     (Sec.  28.) 

Enforcement  of  ^^  order  to  enforce  his  lien  for  a  claim 
lien.  which  has  become  due,  the  warehouseman 

must  give  written  notice  to  the  person  for  whose  account 
the  goods  are  held,  and  to  any  other  person  known  to 
have  a  claim  upon  or  an  interest  in  them.  (Sec.  33.)  This 
notice  must  be  given  by  delivery  in  person  to  the  one  to 
be  notified,  or  sent  by  registered  letter  addressed  to  his 
last  known  place  of  business  or  residence.  (Sec.  33.) 
Demand;  notice  The   notice  must   contain   an  itemized 

satisfy  lien;  what  statement  of  the  warehouseman's  claim, 
must  contain.  showing  the  sum  due  at  the  time  of  the 
notice  and  the  date  or  dates  when  it  became  due,  a  brief 
description  of  the  goods  against  which  the  lien  exists 
and  a  demand  that  the  amount  of  the  claim  as  stated  in 
the  notice,  and  any  additions  as  shall  accrue,  must  be 
paid  on  or  before  a  day  mentioned.  (Sec.  33.)  The  time 
within  which  payment  is  required  by  the  notice  must  not 
be  fixed  at  less  than  ten  days  from  the  date  of  the  deliv- 
ery of  the  notice  or  the  date  when  it  should  reach  its 


324  QUASI-NEGOTIABLE  INSTRUMENTS 

destination  in  due  course  of  post  if  it  is  sent  by  mail. 
(Sec,  33.)  The  notice  must  also  contain  a  statement  that 
unless  the  claim  is  paid  within  the  time  specified,  the 
goods  will  be  advertised  and  sold  at  public  auction  and 
the  date,  time  and  place  of  the  sale  must  be  specified. 
(Sec.  33.) 

Auction  sale  to  -^^  auction  sale  may  then  be  held  after 
satisfy  lian.  the    time    specified    in    the    notice    has 

elapsed,  in  accordance  with  the  terms  of  the  notice.  It 
must  be  held  in  the  place  where  the  lien  was  acquired 
unless  that  place  is  unsuitable,  when  it  must  be  held  at 
the  nearest  suitable  place.  (Sec.  33.)  The  sale  must  be 
advertised  by  publication  once  a  week  for  two  consecu- 
tive weeks  in  a  newspaper  published  in  the  place  where 
the  goods  are  to  be  offered  for  sale,  or  if  no  newspaper 
is  published  there,  the  advertisement  must  be  posted  at 
least  ten  days  before  the  date  when  the  sale  is  to  be  held, 
in  not  less  than  six  conspicuous  places  therein.  (Sec.  33.) 
The  advertisement  must  describe  the  goods  to  be  sold, 
state  the  name  of  their  owner  or  of  the  person  for  whose 
account  they  are  to  be  sold  and  the  time  and  the  place 
of  the  sale.    (Sec.  33.) 

If  at  any  time  before  the  goods  are  so  sold  any 
person  claiming  a  right  of  property  or  possession  in  them 
offers  to  pay  the  amount  necessary  to  satisfy  the  lien 
and  the  reasonable  expenses  and  liabilities  incurred  in 
serving  notices  and  advertising  and  preparing  for  the 
sale  up  to  the  time  of  payment,  the  warehouseman  must 
accept  the  proffer.  He  must  then  deliver  the  goods  to 
the  person  making  such  payment,  if  he  is  a  person  who 
is  entitled  to  their  possession  under  the  provisions  of 
this  Act.  Otherwise  he  must  retain  possession  of  the 
unsold  portion  of  the  goods  according  to  the  terms  of  the 
original  contract  of  deposit.    (Sec.  33.) 


WAREHOUSE  RECEIPTS  325 

The  remedy  provided  for  eiit'orcing  his  lien  does  not 
preclude  the  warehouseman  from  resorting  to  any  other 
means  provided  by  law  for  the  enforcement  of  a  lien 
against  personal  property,  nor  bar  his  right  to  recover 
from  his  debtor  so  much  of  his  claim  as  may  remain 
unsatisfied  after  the  sale  of  the  stored  goods.     (Sec.  35.) 

Disposal  of  The  proceeds  of  any  sale  of  the  goods 

proceeds  of  sale,  n^i^igt  be  applied  to  pay  the  warehouse- 
man's lien,  including  the  reasonable  expenses  of  the  sale, 
and  the  balance,  if  any,  held  by  him  and  delivered  upon 
demand  to  the  person  to  whom  he  would  have  been  justi- 
fied in  delivering  the  goods.  (Sec.  34.)  If  the  goods  are 
separable  he  may  not  dispose  of  more  of  them  than  will 
be  necessary  to  satisfy  his  lawful  claims  which  have 
accrued. 

Sale  of  If  the  goods  deposited  are  of  a  perish- 

perishable  goods,  ^ble  nature  or  by  keeping  will  deteriorate 
greatly  in  value,  or  if  by  their  odor,  inflammability,  leak- 
age, or  explosive  nature  will  be  liable  to  injure  other 
property,  the  warehouseman  may  give  such  reasonable 
notice  to  the  owner  or  the  person  in  whose  name  they  are 
stored  as  is  possible  under  the  circumstances,  requiring 
him  to  satisfy  his  charges  and  remove  the  goods  from 
the  warehouse  within  a  specified  time.  (Sec.  34.)  If  the 
persons  so  notified  do  not  comply  with  the  notice,  the 
warehouseman  may  thereupon  proceed  to  sell  the  goods 
at  public  or  private  sale  without  advertisement  and  if 
after  a  reasonable  effort  to  do  so,  he  is  unable  to  sell 
them,  he  may  proceed  to  dispose  of  them  in  any  lawful 
manner  without  incurring  any  liability  by  reason  thereof. 
(Sec.  34.) 

Obligation  to  When  the  stored  goods  have  been  law- 
deliver  ceases  fully  sold  the  warehouseman  is  not  there- 
gooJs^  after  liable  for  a  failure  to  deliver  them 


326  QUASI-NEGOTIABLE  INSTRUMENTS 

to  the  depositor  or  to  the  holder  of  the  receipt  issued 
for  them  when  they  were  deposited,  even  if  the  receipt  is 
negotiable.     (Sec.  36.) 

,  The  obligation  of  the  warehouseman  to 

Proper  and  °  -r.         i  v 

improper  delivery  deliver  the  goods  is  fulfilled  if  he  delivers 
of  goods.  ^i^^j^  ^^  ^jjg  person  lawfully  entitled  to 

their  possession  or  to  his  agent,  or  if  he  delivers  the 
goods  to  one  who  is  either  himself  entitled  to  delivery 
by  the  terms  of  a  non-negotiable  receipt  or  who  presents 
written  authority  from  the  person  so  entitled  to  receive 
them.     (Sec.  9.) 

The  delivery  is  also  properly  made  if  the  warehouse- 
man surrenders  the  goods  to  a  person  in  possession  of 
a  negotiable  receipt  by  the  terms  of  which  the  goods  are 
deliverable  to  him  or  his  order,  or  bearer,  or  one  which 
has  been  indorsed  to  him  or  in  blank,  by  the  person  to 
whom  delivery  is  promised  in  the  receipt,  or  by  his 
mediate  or  immediate  indorsee.    (Sec.  9.) 

But  if  the  warehouseman  delivers  the  goods  to  one 
w^ho  is  not  in  fact  lawfully  entitled  to  their  possession 
or,  if  before  delivering  them  as  described  in  the  immedi- 
ately preceding  paragraph  to  a  person  in  possession  of 
a  negotiable  receipt  and  appearing  to  be  entitled  to  their 
possession,  he  is  requested  by  or  on  behalf  of  the  person 
lawfully  entitled  to  a  right  of  property  or  possession  in 
the  goods  not  to  make  such  delivery;  or  if  he  has  infor- 
mation that  the  deliver}'  about  to  be  made  is  not  to  one 
lawfully  entitled  to  their  possession,  he  will  not  be  deemed 
to  -have  made  a  proper  delivery  and  will  continue  to  be 
liable  to  the  real  owner  of  the  goods.    (Sec.  10.) 

Liability  for  If  the  warehouseman  fails  upon  delivery 
failure  to  cancel      ^  xi  j    ±     ±  i  i  i 

receipt.  ^^  ^'^^  goods  to  take  up  and  cancel  a  nego- 

tiable receipt  which  he  has  issued  for  them,  he  will  be  lia- 
ble, notwithstanding  their  deliver}^  to  any  one  who  pur- 


WAREHOUSE  RECEIPTS  327 

chases  such  receipt  in  good  faith  and  for  value  whether 
he  ac(iuired  title  before  or  after  such  delivery  and  must 
answer  to  him  for  the  goods  or  their  value.    (Sec.  11.) 

One  who  has  lost  a  negotiable  receipt  may  apply  to  a 
court  of  competent  jurisdiction,  if  the  warehouseman 
Logt  will  not  otherwise  accept  indemnity  and 

receipt.  deliver  the  goods,  for  an  order  for  their 

delivery  to  him  and  upon  satisfactory  proof  of  the  loss  or 
destruction  of  the  receipt  the  court  may  order  that  the 
goods  shall  be  delivered  to  him  upon  the  execution  of  a 
bond  with  approved  sureties  to  hold  the  warehouseman 
harmless  from  any  liability  or  expense  which  he  or  any 
person  injured  may  thereby  sustain,  should  the  original 
outstanding  receipt  be  presented.  The  court  may  also  at 
its  discretion  order  the  payment  of  the  warehouseman's 
reasonable  costs  and  counsel  fees.  (Sec.  14.)  A  delivery 
of  the  goods  even  when  made  under  an  order  of  a  court, 
will  not  relieve  the  warehouseman  of  liability  to  a  person 
to  whom  the  negotiable  receipt  has  been  negotiated  for 
value  without  notice  of  the  proceedings  or  of  their  deliv- 
ery.    (Sec.  14.) 

The  warehouseman  will  not  be  excused  from  delivering 
the  goods  described  in  his  receipt,  or  from  liability  for 
refusing  to  do  so,  because  he  claims  title 
Tannt'Sr  to  the  goods,  or  the  right  to  their  pos- 
title  in  himself,  session,  unless  he  acquired  title  or  the 
right  directly  or  indirectly  from  the  depositor  of  the 
goods  at  the  time  of  or  subsequent  to  their  deposit  with 
him  for  storage,  or  by  reason  of  his  warehouseman's 
lien.    (Sec.  16.) 

If  two  or  more  persons  claim  title  to  the  goods  he  may 
require  them  to  bring  an  action  of  interpleader  to  deter- 


328  QUASI-NEGOTIABLE  INSTRUMENTS 

Rieht  to  mine  their  respective  claims  or  he  may 

interplead  himself  bring  such  a  suit  or  set  up  their 

adverse  ^  i    •  j  x         i?    i  i? 

claimants  to         adverse  claims  as  a  matter  oi  deiense  m 

goods.  any  action  brought  against  him  for  the 

recovery  of  the  goods  and  require  them  to  interplead. 
(Sec.  17.)  He  may  also  refuse  delivery  if  he  has  in- 
formation that  some  one  other  than  the  depositor  claims 
an  interest  in  the  goods  and  pending  a  determination 
of  the  rights  of  the  prospective  adverse  claimants,  he  will 
be  excused  from  making  delivery  during  such  reasonable 
time  as  he  may  require  to  investigate  their  claims  or  to 
bring  legal  proceedings  to  require  them  to  interplead. 
(Sec.  18.)  But  except  as  has  been  stated  herein,  when 
two  or  more  persons  claim  under  the  receipt  to  own  the 
stored  goods,  no  right  or  title  of  a  third  party,  a  stranger 
to  the  receipt,  or  to  the  transaction  by  which  the  goods 
were  acquired  by  the  warehouseman,  will  be  a  defense 
to  any  action  brought  against  the  warehouseman  by  the 
depositor  or  the  holder  of  the  receipt  to  recover  the 
stored  goods.     (Sec.  19.  ) 

Aside  from  the  penalties  which  are  usually  prescribed 
for  the  issue  of  a  fraudulent  receipt,  a  warehouseman 
Liability  of  ^^'^^^  ^^  liable  to  the  holder  of  a  receipt  for 

warehouseman  damages  caused  by  the  non-existence  of 
for  non-existence  ^,  ,      „  i  •  i     -i.  •  i  i, 

or  failure  of        ^^^^  goods  tor  which  it  was  issued  or  by 

goods  to  their  failure  to  correspond  with  their  de- 

description,  scription  in  the  receipt  at  the  time  of  its 

issue.  (Sec.  20.)  But  if  the  goods  are  described  merely 
by  a  statement  of  marks  or  labels  upon  them  or  upon  the 
packages  in  which  they  are  contained,  or  if  the  receipt 
contains  a  statement  that  the  goods  are  said  to  be,  or  the 
packages  are  said  to  contain  goods  of  a  certain  kind,  this 
statement,  if  true,  will  relieve  him  of  liability  should  they 
prove  to  be  goods  of  a  different  kind  or  quality  from  that 


WAREHOUSE  RECEIPTS  329 

indicated  by  the  marks  or  labels,  or  different  from  the 
kind  or  quality  they  were  said  to  be  by  the  depositor. 
(Sec.  20.)  He  will  be  liable,  however,  for  any  loss  or  in- 
jury to  the  goods  caused  by  his  failure  to  exercise  such 
care  over  them  while  they  are  in  his  charge  as  a  reasona- 
bly careful  owner  of  similar  goods  would  exercise  and,  in 
the  absence  of  an  express  agreement  to  the  contrary,  that 
is  the  limit  of  his  liability  in  that  regard.  (Sec.  21.)  He 
has  no  insurable  interest  in  goods  which  are  not  wholly 
or  partly  his  own  and  is  under  no  obligation  to  the  deposi- 
tor to  insure  them  against  destruction  by  fire  while  in 
his  custody. 

A  warehouseman  must  keep  the  goods  of  each  depositor 
separate  from  the  goods  of  others  and  from  his  own  and 
Separation  of  ^^^^^  goods  of  the  same  depositor  for 
goods.  which  separate  receipts  have  been  issued, 

to  such  an  extent  at  least,  that  they  may  be  at  all  times 
accessible  to  the  depositor,  easily  identified,  and  capable 
of  separate  re-delivery.  (Sec.  22.)  If  he  is  authorized 
to  do  so  by  agreement  or  by  custom,  as  when  grain  or 
iron  is  warehoused,  he  may  mingle  goods  of  a  kind  and 
grade  with  other  goods  of  the  same  kind  and  grade.  (Sec. 
23.)  In  that  case  the  various  depositors  will  own  the 
mingled  mass  and  each  will  be  entitled  to  withdraw  or 
dispose  of  such  proportion  thereof  as  the  amount  depos- 
ited by  him  shall  bear  to  the  whole.  (Sec.  23.)  The  ware- 
houseman will  be  liable  to  each  depositor  for  the  care  of 
and  re-delivery  of  his  part  of  the  whole  mass  in  the  same 
manner  and  to  the  same  extent  as  if  the  goods  had  been 
kept  separate.     (Sec.  24.) 

If  the  receipt  which  the  warehouseman  has  issued  has 
been  fraudulently  altered  it  shall  not  excuse  him  from  his 

..^     ..        -        liabilitv  to  keep  and  deliver  the  goods  ac- 
Alteration  of  '         .  ... 

receipt.  cording  to  its  terms  as  originally  issued, 


330  QUASI-NEGOTIABLE  INSTRUMENTS 

even  to  the  person  who  so  altered  it,  but  it  will  excuse  him 
from  any  other  liability  to  that  person  or  a  subsequent 
holder  who  took  it  with  notice  of  the  alteration  and  any 
purchaser  for  value  without  notice  acquires  only  such 
rights  against  him  as  he  would  have  acquired  if  the  re- 
ceipt had  not  been  altered  at  the  time  of  his  purchase. 
(Sec.  13.)  If  the  alteration  is  not  a  material  alteration, 
or  was  made  without  fraudulent  intent,  it  does  not  excuse 
the  warehouseman  from  liability  upon  the  receipt,  accord- 
ing to  its  original  effect  and  if  authorized  he  will,  of 
course,  be  liable  according  to  its  altered  effect.    (Sec.  13.) 

The  foregoing  are,  in  substance,  the  principal  provi- 
sions of  the  law  in  respect  to  the  issue  of  the  receipt  and 
the  rights  and  obligations  of  the  warehouseman  and  of 
the  depositor  of  the  goods  and  his  transferees.  The  man- 
ner of  its  negotiation  and  how  it  obtains  those  qualities 
which  make  it  akin  to  fully  negotiable  instruments  are 
next  provided  for. 

A  negotiable  receipt  may  be  negotiated  either  by  de- 
livery or  by  indorsement;  by  delivery  merely  when,  by 
Negotiation  of  ^^^^  terms  of  the  receipt  the  warehouse- 
receipt,  nian  undertakes  to  deliver  the  goods  to 
bearer,  or  when  the  receipt,  by  its  terms,  declares  that 
the  goods  are  deliverable -to  a  specified  person  or  to  his 
order  and  he  has  indorsed  it  in  blank  or  to  bearer  (Sec. 
37).  When  the  goods  are  by  the  terms  of  the  receipt  de- 
liverable to  bearer  or  to  a  specified  person,  or  his  order, 
it  is  negotiable  by  indorsement  and  if  a  receipt  originally 
requiring  indorsement  has  been  indorsed  in  blank,  or  to 
bearer,  the  holder  may  indorse  the  same  to  himself,  or  to 
any  other  specified  person,  whereupon  it  can  thereafter 
be  negotiated  only  by  his  own  indorsement  or  that  of  the 
person  to  whom  the  goods  become  deliverable  by  his  in- 
dorsement (Sec.  37).    The  negotiation  may  continue  by 


WAREHOUSE  RECEIPTS  331 

indorsement  in  blank,  to  bearer,  or  to  a  specified  person 
indefinitely  (See.  37).  A  receipt  which  is  in  such  form 
that  it  cannot  be  negotiated  may  be  transferred  by  the 
holder  to  a  purchaser  or  as  a  gift  to  a  donee,  but  a  non- 
negotiable  receipt  cannot  be  negotiated  and  the  indorse- 
ment of  such  a  receipt  confers  no  additional  right  upon 
the  indorsee  (Sec.  39). 

The  negotiation  may  be  by  the  owner  or  by  the  iserson 
to  whom  its  possession  or  custody  has  been  entrusted  by 
By  whom  ^^^^  owner  if,  by  its  terms,  the  warehouse- 

negotiable,  nian  has  agreed  to  deliver  the  goods  to 

the  order  of  such  person,  or  if  it  is  at  that  time  in  such 
form  that  it  is  negotiable  by  delivery  (Sec.  40). 

The  jjerson  to  whom  a  negotiable  receipt  has  been  ne- 
gotiated acquires  with  its  transfer  whatever  title  the 
Rights  of  person  from  whom  he  acquired  it  has  in 

holder,  the  goods  or  had  the  ability  to  convey  to 

the  purchaser  in  good  faith,  for  value,  and  the  full  title 
and  right  to  the  goods  which  the  depositor  had  to  whom 
it  was  issued  and  had  the  ability  to  convey  to  a  purchaser 
in  good  faith,  for  value  (Sec.  41).  He  also  acquires  the 
direct  obligation  of  the  warehouseman  to  hold  the  goods 
for  him  as  fully  as  though  he  had  originally  contracted 
with  him  and  the  right  to  sue  in  his  own  name  to  enforce 
his  right  to  the  goods  (Sec.  41).  One  to  whom  a  receipt 
has  been  transferred  but  not  negotiated,  acquires  title 
to  the  goods  subject  to  the  terms  of  any  agreement  with 
his  transferor  under  which  the  receipt  was  transferred 
to  him.  If  the  receipt  is  non-negotiable  he  may  notify  the 
warehouseman  of  its  transfer  to  him  (Sec.  42).  Upon 
giving  such  notice  he  thereby  obligates  the  warehouse- 
man to  hold  the  goods  for  him  according  to  the  terms  of 
the  receipt  (Sec.  42).  If  he  neglect  to  give  notice  a  sub- 
sequent sale  of  the  goods  or  a  lien  acquired  by  any 


332  QUASI-NEGOTIABLE  *  INSTRUMENTS 

creditor  of  liis  transferor  by  attachment  or  execution 
upon  the  goods  or  other  process  of  law,  or  by  notifica- 
tion to  the  warehouseman,  will  have  priority  over  his 
rights  under  the  receipt  and  defeat  his  title  and  right 
to  acquire  the  ol)ligation  of  the  warehouseman  to  hold 
the  goods  for  him  (Sec.  42). 

If  a  negotiable  receii:)t  is  transferred  for  value  by  de- 
livery and  the  indorsement  of  the  transferor  is  essential 
Eight  to  require  ^o  its  valid  negotiation,  the  transferee 
indorsement.  ^an  compel  its  indorsement  by  the  trans- 

feror unless  it  appear  that  it  was  not  intended  that 
he  should  do  so.  The  negotiation  is  considered  as  tak- 
ing effect  at  the  date  when  the  indorsement  of  the  trans- 
feror is  obtained  and  in  the  meantime  the  rights  of  the 
transferee  are  subject  to  intervening  rights  of  other 
persons  claiming  an  interest  in  or  title  to  the  receipt  or 
the  goods  Avhicli  it  represents   (Sec.  43). 

One  who  negotiates  or  transfers  a  receipt  by  indorse- 
ment or  delivery,  whether  negotiable  or  non-negotiable, 
Warranty  of  or  who  assigns  for  value  a  claim  secured 
transferor.  jjy  ^  receipt,  warrants  that  the  receipt  is 

genuine,  that  he  has  a  legal  right  to  negotiate  or  trans- 
fer it,  that  he  has  no  knowledge  of  any  fact  which  would 
impair  its  validity  or  value  and  that  he  has  a  right  to 
transfer  the  title  to  the  goods  which  it  represents.  He 
also  warrants  that  the  goods  are  merchantable  or  fit 
for  the  purpose  for  which  they  are  represented,  provided 
such  warranties  would  have  been  implied  if  the  contract 
had  been  to  transfer  without  the  receipt  the  actual  goods 
for  which  it  was  issued  (See.  44). 

One  who  indorses  a  receipt  does  not  assume  liability 
for  any  failure  on  the  part  of  the  warehouseman  or  pre- 
Liability  cf  vious  indorsers  to  fulfil  their  respective 

indorser.  obligations  (Sec.  45).     When  the  receipt 


WAREHOUSE  RECEIPTS  333 

is  the  subject  of"  a  mortgage  or  a  pledge,  or  is  held  as 
security  by  one  who  in  good  faith  demands  and  receives 
Pled'^ee  or  payment  of  the  debt  which  it  secures,  the 

mortgagee.  person     so     receiving    payment     is     not 

deemed  to  represent  or  warrant  the  genuineness  of  the 
receipt  or  the  quantity  or  quality  of  the  goods  it  de- 
scribes and  for  which  it  purports  to  have  been  issued 
(Sec.  46). 

The  validity  of  any  otherwise  regular  negotiation  of 
the  receipt  will  not  be  impaired  by  the  fact  that  its  ne- 

„     ,.  ^.       .        gotiation  was   a  breach  of  duty  on  the 
Negotiation  in       '^  •  xi     i. 

breach  of  duty  or  part  of  the  person  negotiatmg  it,  or  that 
by  mistake,  etc.  ^^i^  owner  of  the  receipt  was  induced  by 
fraud,  duress,  or  mistake  to  entrust  its  custody  or  pos- 
session to  the  person  so  negotiating  it,  provided  the 
person  to  whom  it  was  negotiated,  or  one  to  whom  it  is 
subsequently  negotiated,  paid  value  for  it  without  notice 
of  the  breach  of  duty,  fraud,  duress  or  mistake  (Sec.  47). 
If,  having  pledged,  mortgaged  or  sold  goods  which  are 
in  a  warehouse  and  for  which  a  negotiable  receipt  has 
been  issued,  or  having  so  disposed  of  the  receipt,  the 
person  so  disposing  of  the  goods  or  the  receipt  continues 
in  possession  of  the  receipt,  a  subsequent  sale  or  other 
disposition  of  it  by  him  will  convey  to  a  purchaser  in 
good  faith,  without  notice  of  its  previous  disposition,  or 
the  disposition  already  made  of  the  goods,  as  good  a  title 
as  though  the  first  purchaser  had  authorized  its  subse- 
quent disposition  (Sec.  48).  No  right  of  stoppage  in 
transitu-  or  seller's  lien  will  defeat  the  rights  of  a  pur- 
chaser for  value  of  the  receipt  to  whom  such  receipt  has 
been  negotiated,  in  good  faith,  before  or  after  notice  to 
the  warehouseman  of  the  claim  of  the  seller  of  the  goods 
to  a  lien,  or  to  the  right  of  stoppage  in  transitu,  and  no 
warehouseman  is  obliged  to  deliver  the  goods  to  an  un- 


334  QUASI-NEGOTIABLE  INSTRUMENTS 

paid  seller  or  justified  in  doing  so,  unless  the  receipt  is 
first  surrendered  for  cancellation  (Sec.  49). 

The  rules  of  law  and  equity,  including  the  law  mer- 
chant, and  particularly  the  principles  and  rules  of  the 

,.    ^,      law  of  agency  govern  in  the  interpreta- 
Laws  apphcaWe  ^  ^^        •  %  f         .-,    .-         n         ..       - 

to  warehouse         tion  of  the  rights  and  duties  oi  parties  to 

receipts.  warehouse  receipts  when  they  are  not  in 

conflict  with  laws  specially  enacted  for  their  govern- 
ment. As  is  the  case  with  bills  of  lading  and  other  in- 
struments partly  negotiable  and  governed  by  the  law 
merchant,  terms  are  employed  in  the  law  relating  to 
warehouse  receipts  which  you  will  readily  recognize  as 
having  already  been  sufficiently  explained  in  the  treat- 
ment of  the  Uniform  Negotiable  Instruments  Law.  Con- 
sult freely  the  explanations  given  there,  keeping  in  mind, 
however,  that  although  w^arehouse  receipts  very  fre- 
quently accompany  bills  of  exchange  and  promissory 
notes  as  collateral,  and  partake  to  a  very  great  extent  of 
many  of  their  features  of  negotiability,  the  explanations 
of  terms  common  to  both  are  to  be  applied  to  them  with- 
in the  limits  prescribed  by  the  law  by  which  they  are 
governed. 

As  in  the  case  of  bills  of  lading,  you  will  doubtless  have 
observed  a  striking  similarity  between  the  provisions 
of  the  law  for  the  government  of  warehouse  receipts  and 
the  law  of  negotiable  instruments  upon  the  subject  of 
transfer,  negotiation,  warranties,  etc. 

No  special  provision  is  made  in  this  Act  upon  the  sub- 
ject of  forgery,  a  forged  signature  or  indorsement  of  a 
Penalties  for  warehouse  receipt,  as  any  forged  signa- 
fraud,  etc.  ture,  being  inoperative  and  imposing  no 

obligation  whatever  upon  the  person  whose  signature  it 
purports  to  be. 


WAREHOUSE  RECEIPTS  335 

Ol)I)ortiinity  for  the  practice  of  fraud  having  developed 
from  the  issue  of  receipts,  extreme  penalties,  heavy  fines 
and  imprisonment,  are  imposed  by  law  upon  any  one  who 
issues  or  procures  to  be  issued,  or  aids  in  issuing  a  fraud- 
ulent receipt,  or  one  who  fraudulently  misrepresents 
the  title  to  the  goods  stored  or,  with  intent  to  defraud, 
dis]ioses  of  stored  goods  which  are  subject  to  a  mortgage 
lien. 


336  QUASI-NEGOTIABLE  INSTRUMENTS 


CEETl'FICATES  OF  STOCK. 


In  a  very  restricted  sense,  certificates  of  stock  have 
been  accorded  by  mercantile  custom  and  by  statute  the 
quality  of  negotiability,  but  some  writers  contend  that  to 
term  them  quasi-iiegoti'dhle  is  misleading  and  confusing. 
Corporations  are  creations  of  statute  and  in  all  States 
the  laws  which  authorize  incorporation  either  provide 
the  manner  in  which  their  shares  may  be  transferred  or 
that  the  company  itself  may  do  so  in  its  by-laws  or  regu- 
lations. To  such  an  extent  do  the  statutes  of  the  States 
vary  in  their  provisions  for  incorporation  that  men  about 
to  associate  themselves  in  business  as  a  body  corporate 
are  offered  a  variety  of  more  or  less  attractive  corpora- 
tion laws  from  which  to  choose.  In  one  respect,  however, 
they  are  all  very  much  alike  and  that  is  in  their  provision 
that  shares  of  stock,  when  it  is  not  left  to  the  corporation 
itself  to  determine  the  manner  in  which  they  may  be 
transferred,  are  transferrable  only  upon  the  books  of 
the  company. 

If  a  provision  to  this  effect  were  not  interpreted  to 
mean,  as  indeed  it  is  in  nearly  all  the  States,  that  this 
restriction  is  intended  for  the  protection  of  the  corpora- 
tion and  its  stockholder  of  record,  certificates  of  stock 
would  possess  none  of  the  qualities  of  negotiability.  In 
most  States  it  is  either  now  provided  by  statute,  judicial 
construction,  or  as  a  rule  of  equity,  that  a  written  as- 
signment of  the  certificate  accompanied  by  delivery  vests 
the  legal  title  to  the  shares  it  represents  in  the  trans- 
feree, even  without  a  formal  transfer  on  the  books  of 


TRANSFER  OF  CERTIFICATES  OF  STOCK        337 

the  coi'iDoratioii.^  This  construction  has  been  adopted 
for  the  sake  of  business  convenience  and  by  reason  of  it 
stock  certificates  obtain  one  of  tlieir  attributes  of  nego- 
tiability. 

>,,     „    r  Uniformity  in  the  statute  law  govern- 

Tne  Uniform  •  ^ 

Stock  Transfer  ing  stock  transfers  is  very  much  to  be 
^  ■  desired  and  an  Act  prepared  by  the  Uni- 
form Laws  Commission  by  which  it  is  hoped  to  accom- 
plish that  result  is  effective  now  in  twelve  States;  Con- 
necticut, Illinois,  Louisiana,  Maryland,  Massachusetts, 
New  York,  New  Jersey,  Ohio,  Pennsylvania,  Rhode 
Island,  Tennessee  and  Wisconsin.  Its  provisions  in  re- 
spect to  the  transfer  of  shares  are  effective,  however,  in 
one  form  or  another,  in  most  of  the  other  States  so  that 
it  may  be  said  to  be  declaratory  of  the  law  as  it  exists 
in  nearly  all.  In  this  explanation  of  the  law  on  the 
subject  of  the  transfer  of  shares  I  will  cite  the  pro- 
visions of  that  Act  whenever  it  is  applicable,  using  its 
language  as  freely  as  possible  and  employing  the  ab- 
breviated title  thus,  U.  S.  T.  A.  Sec ,  for  reference. 

In  sup])ort  of  those  statements  of  the  law  upon  this  sub- 
ject which,  though  outside  the  scope  of  the  Uniform  Act, 
nevertheless  are  of  importance  to  a  general  knowledge 
of  the  law  governing  the  transfer  of  shares,  I  will  cite 
the  reader  Avho  may  desire  to  pursue  the  subject  more 
thoroughly  to  approved  decisions  by  the  aid  of  which 
a  very  complete  understanding  of  the  law  may  be  ob- 
tained. 

1.     .Tohnson  vs.  Laflin.  303  U.  S.  800,  804,  26  U.  S.  (L.  Ed.)  532. 
O'Neil  vs.  Walcott  Min.  Co..  174  Fed.  527,  98  C.  C.  A.  309,  27 
L.  R.  A.,  N.  S.  200. 
Cullodeu  Bk.  vs.  Forsvtli  Bk.,  120  Ga.  575.  48  S.  E.  220,  102 
A.  S.  R.  115. 
Gemmell  vs.  Davis,  75  Md.  546,  23  Atl.  1032. 


338  QUASI-NEGOTIABLE  INSTRUMENTS 

Methods  of  Upon  examination  of  the  blank  form 

effecting  transfer.  ^^^  transfer  which  will  be  found  upon  the 

back  of  every  stock  certificate  it  will  be  observed  that  it 
provides  for  the  appointment  of  someone  to  act  as  the 
attorney  or  agent  of  the  person  in  whose  name  the  cer- 
tificate is  issued  and  gives  him  authority  to  transfer 
the  shares  on  the  books  of  the  corporation.  It  is  not 
necessary  that  this  form  alone  be  used  or  that  it  be 
executed  in  the  negotiation  of  the  certificate,  for  a  trans- 
fer of  the  shares  may  be  procured  by  a  separate  power 
of  attorney  (U.  S.  T.  A.,  Sec.  lb),  and  where  shares  are 
used  as  collateral  to  a  loan  or  deposited  as  security  for 
any  other  purpose  a  separate  power  of  attorney  is  usu- 
ally employed.  This  is  done  for  the  reason  that  since 
the  immediate  transfer  of  the  shares  is  often  not  con- 
templated, it  is  not  at  all  desirable  to  have  the  certificate 
continue  to  bear  a  blank  indorsement.  There  are,  then, 
these  two  methods  of  accomplishing  the  transfer  of  the 
shares.  In  each  it  is  customary  upon  desiring  an  actual 
transfer  upon  the  books  of  the  corporation  that  the 
holder  of  the  certificate,  or  the  person  authorized  to  do 
so  by  the  separate  power  of  attorney,  insert  in  the  trans- 
fer the  name  of  the  person  to  whom  he  desires  the  new 
stock  certificate  to  issue.  He  need  not  designate  the 
name  of  the  person  to  make  the  actual  transfer  on  the 
company's  stock  register,  although  a  space  is  provided 
in  the  form  on  the  back  of  the  certificate  for  the  inser- 
tion of  his  name.  The  secretary  of  the  company  or  its 
transfer  clerk  or  agent  usually  inserts  his  own  name  and 
proceeds  to  make  the  transfer  upon  surrender  of  the 
certificate. 

Pending  the  actual  transfer  conflicting 
transfer  conveys  claims  to  the  ownership  of  or  an  interest 
legal  title.  jn  the  stock  frequently  arise.    They  usu- 


TRANSFER  OP  CERTIFICATES  OF  STOCK        339 

ally  grow  out  of  claims  of  creditors  of  the  transferer. 
In  those  States  in  which  the  Unif oral  Stock  Transfer  Act 
is  in  effect,  and  in  nearly  all  others,  it  is  not  requisite  to 
the  complete  ownership  of  the  shares  that  they  must  be 
transferred  of  record  on  the  company's  books,  even 
though  its  regulations  or  the  certificates  themselves,  or 
the  law  of  the  State  under  which  the  company  is  incor- 
porated seems  to  require  it.  (U.  S.  T.  A.,  Sec.  1.)  Such 
regulatory  provision  is  intended  as  a  protection  to  the 
corporation,  its  members  and  its  creditors,  and  not  for 
the  creditors  of  the  stockholder.-     (See  note  one.) 

^.  ^.,.,      .  However,  in  the  absence  of  statutory 

Liabihty  of  ' 

registered  owner  provision  to  the  contrary,  the  person 
continues  until  ^y\-^Q^(,  name  is  registered  on  the  com- 
registered.  pany's  books  as  the  owner  of  the  shares 

will,  as  between  himself  and  the  company,  be  held  liable 
for  calls  and  assessments  upon  the  shares^  and  payment 
by  the  company  to  him  of  dividends  will  be  a  bar  to  a 
claim  to  them  by  the  holder  of  the  certificate  to  whom 
it  has  been  transferred^  (U.  S.  T.  A.,  Sec.  3b),  unless 
the  company  have  valid,  binding  notice  that  the  stock- 
holder of  record  has  ceased  to  be  the  owner  of  the  shares. 
An  ordinary  notice  either  verbal  or  in  writing  that  one 
has  acquired  the  shares  of  another  in  the  company  is 
usually  regarded  as  sufficient  if  it  is  accompanied  by  an 
attempt  to  obtain  their  transfer  upon  the  company's 
books.^  In  that  case,  if  the  transfer  is  refused  or  unduly 
delayed  by  the  company,  the  notice  and  attempt  to  trans- 

2      Mai)leton  Bk.  vs.  Stanvod,  S  Idaho,  740,  71  Pac.  119. 

State  Bank'g  &  Tr.  Co.  vs.  Taylor,  25  S.  D.  577,  127  N.  \V. 
590.  29  L.  R.  A.,  N.  S.  523. 

3.  American  Alkali  Co.  vs.  Campbell,  113  Fed.  398. 

4.  Gemmell  vs.  Davis,  75  Md.  546,  23  Atl.  1032,  32  A.  S.  R.  412. 
Brisbane  vs.  Del.  River,  etc.,  Ry.  Co.,  25  Hun  (N.  Y.),  438. 

5.  Real  Est.  Tr.  Co.  vs.  Bird,  90  Md.  229.  243.  44  Atl.  1048. 
Guarantv  Co.  of  N.  A.  vs.  E.  Rome  Town  Co.,  96  Ga.  511,  23 

S.  E.  503,  51  A.  S.  R.  150. 


340  QUASI-NEGOTIABLE  INSTRUMENTS 

fer  has  the  same  effect  as  an  actual  transfer  as  to  the 
company  and  all  except  its  creditors.^  As  to  these,  if 
the  vendor  has  requested  the  company  to  make  the  trans- 
fer and  honestly  believes  he  has  done  everything  neces- 
sary to  make  the  transfer  effective  that  a  prudent  and 
careful  business  man  would  do,  the  authorities  are  in 
conflict  as  to  whether  or  not  he  will  be  relieved  of  future 
liability  as  a  shareholder/ 

The  company  too,  in  the  absence  of  notice,  may  recog- 
nize the  exclusive  right  of  the  owner  registered  on  its 
books  to  vote  the  shares  standing  there  in  his  name  at 
the  meetings  of  its  stockholders.^  (U.  S.  T.  A.,  Sec.  3  a.) 
And  when  there  is  additional  liability  upon  the  stock, 
imposed  by  statute  for  the  protection  of  the  creditors  of 
the  corporation,  the  stockholder  whose  name  appears  of 
record  is  not  relieved  of  this  liability  until  the  transfer 
is  actually  recorded  upon  the  transfer  books  of  the  cor- 
poration. Even  if  the  corporation  has  recognized  the 
new  holder  of  the  certificates  and  paid  him  dividends,  or 
permitted  him  to  vote  the  shares  at  its  meetings,  the 
shareholder  who  appears  of  record  to  own  the  shares  will 
continue  to  be  liable  to  the  company's  creditors,  preserv- 
ing, of  course,  his  right  to  reimbursement  from  his  trans- 
feree.*^ He  can  only  completely  sever  his  connection 
with  the  corporation  by  insisting  upon  his  right  to  have 
his  transfer  of  the  shares  recorded  upon  the  company's 
transfer  book.^*^ 

6.  Weber  vs.  Bullock,  19  Colo.  214. 

7.  Bracken  vs.  Nicol,  124  Ky.  628.  99  S.  W.  920,  14  Am.  Cas.  S96. 

11  R.  A.  N.  S.  818. 
Contra,  Harpold  vs.  Stobart,  46  Oh.  St.  397,  21  N.  E.  637. 

8.  Roval  Cons.  Min.   Co.  vs.  Royal  Cons.  Mines  Co..   157  Calif. 

737,  757,  110  Pac.  123. 

9.  Man  vs.  Bovkin,  79  S.  C.  1,  60  S.  E.  17,  128  A.  S.  R.  830. 
10.     Richmond  vs.  Irons,  121  U.  S.  27,  7  S.  Ct.  788. 

Visalia,  etc.,  R.  R.  Co.  vs.  Hyde,  110  Calif.,  632,  636,  43  Pac. 

10,  52  Am.  S.  Rep.  136. 
Giesen  vs.  London,  etc.,  Mi^.  Co.,  102  Fed.  584,  42  C.  C.  A. 

515. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        :i41 

Subject  to  the  right  to  reclaim  it  which 
havhig ^possession  ^^'^^^  ^^^  afterward  explained,  the  delivery 
of  certificates.  of  a  certificate  is  effective  to  transfer  title 
between  the  vendor  and  vendee  when  it  is  made  by  one 
having  possession  of  the  certificate  if  there  is  upon  it  a 
])roperly  executed  assignment,  or  if  it  is  accompanied  by 
a  properly  executed  document  containing  a  written  as- 
signment or  power  of  attorney  to  sell,  assign  or  transfer 
the  certificate  or  the  shares  it  represents.  (U.  S.  T.  A., 
Sec.  4.)  This  is  so  even  if  the  person  delivering  the  cer- 
tificate has  no  right  to  its  possession,  is  not  the  person 
named  in  the  document  or  power  as  the-  one  who  is  au- 
thorized to  transfer  it  from  its  owner,  or  is  not  the  per- 
son who  appears  to  be  transferring  the  title  to  the  cer- 
tificate.    (U.  S.  T.  A.,  Sec.  5.) 

And,  subiect  to  the  same  right,  the  in- 
Effect  of  indorse-  ^  '  .  ^-i  ^--c     x    ■■    ^i, 

ment  of  dorsement  of  the  certmcate  by  the  person 

certificate.  appearing  in  it  to  be  its  owner  is  effectual 

even  if  the  indorser  or  transferer  was  induced  by  fraud, 
duress  or  mistake  to  make  the  transfer,  or  if  he  has  al- 
ready revoked  the  delivery  of  the  certificate  or  the  au- 
thority given  by  the  indorsement  or  delivery  of  the  cer- 
tificate, or  has  died,  or  become  legally  incapacitated  after 
having  made  the  indorsement,  whether  before  or  after 
the  delivery  of  the  certificate,  or  received  no  considera- 
tion for  it.     (U.  S.  T.  A.,  Sec.  6.) 

In  every  such  case,  however,  the  pos- 
ulently  ^procured "  session  of  the  certificate  may  be  reclaimed 
as  above  may  be  j^^jj  its  transfer  rescinded  unless  it  has 
been  transferred  to  a  purchaser  for  value, 
in  good  faith,  without  notice  of  any  facts  making  the 
transfer  wrongful,  or  unless  the  injured  party  has  elected 
to  waive  the  injury,  or  has  been  guilty  of  neglect  or 


342  QUASI-NEGOTIABLE  INSTRUMENTS 

undue  delay  in  endeavoring  to  enforce  his  rights. ^^  (U. 
S.  T.  A.,  Sec.  7.)  The  injured  person  may  have  the  aid 
of  a  court  of  proper  jurisdiction  to  enforce  specifically 
his  right  to  reclaim  possession  of  his  certificate  from 
one  who  so  obtained  its  delivery  or  to  rescind  its  trans- 
fer if  the  certificate  has  already  been  transferred  on  the 
company's  books,  and  he  may  require  it  to  be  surren- 
dered according  to  the  court's  order  to  be  held  impounded 
pending  the  determination  of  his  action  to  reclaim  it, 
or  have  an  order  enjoining  its  further  transfer.  (U.  S. 
T.  A.,  Sec.  7.) 

But  pending  all  of  these  remedies,  and 
Transferee  of  •         . 

certificate  so         even  if  the  transfer  of  the  certificate  or 

procured  obtains  ^j^g  shares  which  it  represents  has  already 
indefeasible  title.  .  . 

been  rescmded,  or  set  aside,  nevertheless, 

if  the  transferee  has  possession  of  the  certificate  or  of  a 
new^  certificate,  representing  part  or  all  of  the  same 
shares,  a  subsequent  transfer  of  such  certificate  by  him, 
directly  or  indirectly  to  a  purchaser  for  value  who  takes 
in  good  faith,  without  notice  of  any  facts  making  the 
transfer  wrongful,  will  give  this  purchaser  and  subse- 
quent purchasers  a  right  to  the  certificate  and  the  shares 
it  represents  which  nothing  and  nobody  can  defeat.^^  In 
this  stock  certificates  obtain  their  second  important  char- 
acteristic of  negotiability.  (U.  S.  T.  A.,  Sec.  8.)  The 
rule  is  otherwise,  however,  when  an  indorsed  certificate 
has  been  lost  or  stolen,  as  I  shall  afterward  explain. 

Transfer  by  "^^^^  ^^^^^^  ^^  *^^^  ^^^  ^^  agency  apply 

agent  of  owner,  to  the  indorsement  and  transfer  of  cer- 
tificates of  stock  and  since  the  principle  upon  which  that 
law  is  based  is  that  one  can  do  by  another  anything 

11.  Dunbar  vs.  Ainer.  Tel.,  etc.,  Co.,  224  111.  9,  33,  79  N.  E.  423, 

8  Ann.  Cas.  57. 

12.  Machinist's  Natl.  Bank  vs.  Field,  126  Mass.  345. 
Mandelbaum  vs.  No.  Amer.  Mining  Co.,  4  Mich.  465. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        343 

which  lie  can  himself  do,  the  indorsement  of  the  owner's 
name  upon  the  certificate  by  one  acting  under  his  au- 
thority will  bind  him  as  effectually  as  though  he  had  him- 
self made  the  signature.  (U.  8.  T.  A.,  Sec.  18.)  If  the 
signature  is  unauthorized  the  doctrine  of  ratification  will 
apply  if  by  his  express  acts  or  conduct,  or  by  implication, 
the  principal  brings  himself  fairly  within  its  operation. ^^ 
And,  in  that  provision  of  the  law  under  which  I  have  just 
shown  that  one  taking  for  value  and  without  notice  a 
certificate  duly  indorsed  by  its  owner  and  obtained,  or 
upon  which  the  indorsement  was  obtained  by  fraud, 
duress  or  mistake,  or  other  unlawful  means,  and  nego- 
tiated by  one  appearing  to  be  in  lawful  possession  of  it, 
obtains  an  indefeasible  title  to  the  shares  it  represents, 
his  right  to  the  certificate  is  based  upon  the  doctrine  of 
estoppel  which  imposes  upon  one  who  clothes  another 
with  power  to  do  an  act  not  wrong  in  itself,  but  wrong 
only  because  it  violates  a  trust,  as  between  himself  and 
an  innocent  partj^  to  the  transaction,  who  might  other- 
wise suffer  thereby,  the  duty  to  bear  the  loss.^'* 

If  one  who  appears  to  be  its  owner  de- 
compel  indorse-  livers  the  certificate  with  intent  to  trans- 
°^®"*'  fer  it  but  without  the  indorsement  neces- 

sary to  transfer  the  shares  it  represents,  he  may  be 
compelled  to  execute  the  necessary  transfer  unless  there 
is  an  agreement  to  the  contrary;  and  the  holder  entitled 
to  the  transfer  may  invoke  the  aid  of  a  court  to  secure  it. 
Tl  »  transfer,  however,  will  take  effect  only  at  the  date 
when  it  is  actually  made.  (U.  S.  T.  A.,  Sec.  9.)  A  valid 
agreement  to  transfer  may,  likewise,  be  specifically  en- 
forced and  an  attempted  transfer  without  deliver}^  of  the 

13.  See  Note  Ann.  Cas.  1913  E.  1177. 

14.  Penn  R.  Co.'s  Appeal,  86  Pa.  St.  80. 

Supply  Ditch  Co.  vs.  Elliott,  10  Colo.  327,  333,  15  Pae.  691,  3 
Am.  St.  Rep.  586. 


344  QUASI-NEGOTIABLE  INSTRUMENTS 

certificate  is  the  equivalent  of  a  promise  to  transfer,  the 
obligation  to  perform  which  must  be  determined  by  the 
law  governing  the  formation  and  performance  of  con- 
tracts.   (U.  S.  T.  A.,  Sec.  10.) 

Warranties  by  ^^^^  who,  for  value,  transfers  a  certifi- 

^ansfer.  cate,  including  one  who  assigns  for  value 

Holder  demand-  /.  *,  ,  ^.^   \ 

ing  payment  not  ^  dami  secured  by  a  certificate,  warrants, 

a  guarantor.  unless  the  contrary  appears,  that  the  cer- 
tificate is  genuine,  that  he  has  a  legal  right  to  transfer 
it  and  that  he  has  no  knowledge  of  any  fact  which  would 
impair  its  validity.^^^  (U.  S.  T.  A.,  Sec.  11.)  The  lia- 
bility upon  this  warranty  of  one  who,  holding  the  cer- 
tificate as  security  for  a  claim,  transfers  it,  will  not  ex- 
ceed the  amount  of  the  claim  to  secure  which  it  was 
pledged,  and  if  one  who  holds  the  certificate  as  mortgagee, 
pledgee,  or  as  security  in  any  other  capacity,  demands 
and  receives  payment  of  the  debt  for  Avhich  it  is  security 
he  is  not  deemed  to  warrant  the  genuineness  of  the  cer- 
tificate or  the  value  of  the  shares  it  represents  upon 
transfer  of  the  pledged  certificate.    (U.  S.  T.  A.,  Sec.  12.) 

Attachment  of  Certificates   of   stock,   being  property, 

certificate;  levy,  are  subject  to  attachment,  the  levy  of  ex- 
w  en  va  id.  ecution  or  other  process  of  law  for  the 

enforcement  and  collection  of  debts  by  which  a  lien  or 
preference  is  secured  by  the  creditor  invoking  its  aid 
against  the  debtor's  interest  in  the  shares  which  the  cer- 
tificate represents.  Unless  the  certificate  is  surrendered 
to  the  corporation  or  its  transfer  enjoined,  process  of 
this  kind  served  upon  the  corporation  or  anyone  in  pos- 
session of  the  certificate  is  not  valid  or  effective  if  the 
officer  making  the  levy  or  serving  the  attachment  has  not 
actually  seized  physical  possession  of  the  certificate. 
(U.  S.  T.  A.,  Sec.  13.)     An  equitable  proceeding  in  the 

15.     Note  53  L.  R.  A.  153,  10  Ann.  Cas.  168. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        345 

nature  of  a  creditor's  bill  is  provided  by  law,  however, 
by  which  the  interest  of  a  stockholder  debtor  may  be 
reached  without  actual  seizure  of  the  certificate,  and  a 
creditor  whose  debtor  is  the  owner  of  a  certificate  will  be 
entitled  to  the  aid  of  the  court,  by  injunction  or  other- 
wise, to  satisfy  his  claim  by  whatever  other  extraordi- 
nary remedies  in  his  favor  ma}^  be  provided  by  law  for 
his  l)enefit  when  the  certificate  or  the  debtor's  interest 
in  it  or  in  the  corporation  cannot  be  reached  by  ordinary 
process  of  law.     (U.  S.  T.  A.,  Sec.  14.) 

In   most    States    the    corporation   will 

Corporation  lien  j^^ve  no  valid  lien  upon  its  shares  repre- 
against  its  snares.  ^ 

sented  by  a  certificate  which  it  issues  and 

can  impose  no  restriction  upon  their  transfer  by  reason 
of  any  by-law  or  otherwise,  unless  the  right  to  the  lien 
or  the  restriction  upon  its  transfer  is  stated  upon  the 
certificate.  (U.  S.  T.  A.,  Sec.  15.)  You  will  remember, 
of  course,  that  such  a  provision  is  intended  as  a  protec- 
tion to  the  stockholder  and  the  corporation  and  its  cred- 
itors and  that,  as  has  already  been  stated,  no  restriction 
or  by-law  of  the  corporation  or  provision  in  its  charter 
or  articles  of  incorporation  which  provides  that  the 
shares  represented  by  the  certificate  shall  be  transferable 
only  on  the  books  of  the  corporation,  or  registered  by  a 
registrar,  or  transferred  by  a  transfer  agent,  will  make 
less  effective  and  valid  the  right  to  a  transfer  of  the 
title  to  a  certificate,  otherwise  complete,  to  a  vendee  or 
pledgee  of  a  stockholder,  except  in  those  States  where 
the  courts  yet  hold  contrary  to  the  trend  of  usual  author- 
ity. And  upon  compliance  with  the  company's  regula- 
tions the  holder  can  compel  the  transfer  of  the  cer- 
tificate.^*' 


16.     Mundt  vs.  Comnri  Nat'I  Bank,  35  Utah,  90,  99  P.  454. 
See  Note  136  A.  S.  R.  1023. 


346  QUASI-NEGOTIABLE  INSTRUMENTS 

j^^  A  corporation  cannot,  except  where  the 

certificate.  certificate  has  been  lost  or  destroyed,  be 

compelled  to  issue  a  new  one  until  the  old  certificate  is 
.surrendered  to  it.  Where  a  certificate  has  been  lost  or 
destroyed  a  court  of  competent  jurisdiction  may  order 
the  issue  of  a  new  one  upon  notice  to  the  corporation  of 
the  application  therefor  and  reasonable  notice  to  all  in- 
terested persons  by  publication  or  in  any  other  manner 
in  which  the  court  may  direct  notice  of  the  application  to 
be  given.  (U.  S.  T.  A.,  Sec.  17.)  Upon  satisfactory  proof 
of  the  loss  or  destruction  of  the  certificate  and  upon  giv- 
ing bond  with  sufficient  sureties  to  be  approved  by  the 
court,  conditioned  to  protect  the  corporation  or  any  per- 
son injured  from  any  liability  or  loss  by  the  issue  of  the 
new  certificate,  or  expense  which  it  or  they  may  incur  by 
reason  of  the  original  certificate  remaining  outstanding^ 
the  court  will  usually  order  the  new  certificate  to  be 
issued.  (U.  S.  T.  A.,  Sec.  17.)  The  court  may  also,  in  its 
discretion,  order  the  payment  of  the  corporation's  rea- 
sonable costs  and  counsel  fees.  (U.  S.  T.  A.,  Sec.  17.) 
The  issue  of  a  new  certificate  under  an  order  of  a  court 
will  not  relieve  the  corporation  from  liability  in  dam- 
ages to  a  person  to  whom  the  original  certificate  has 
been  before,  or  shall  be  thereafter  transferred  for  value, 
without  notice  of  the  proceedings  or  of  the  issue  of  the 
new  certificate.     (U.  S.  T.  A.,  Sec.  17.) 

Transf     h  "^^^^  transfer  of  shares  by  or  to  a  per- 

infant  or  person  son  wanting  in  full  legal  capacity,  or  their 
cSadt^  ^^  purchase  or  sale  by  an  infant,  like  any 

other  contract  made  during  disability  by 
minority  or  incapacity  except  one  by  which  the  infant 
supplies  himself  with  necessaries,  is  voidable  by  him 
upon  attaining  full  age  or  when  the  disability  is  removed. 
His  repudiation  must  be  prompt  upon  attaining  his  ma- 


TRANSFER  OF  CERTIFICATES  OF  STOCK         -Ul 

jority  or  the  removal  of  the  disability,  or  a  ratification 
will  be  presumed.  The  corporation  may  not  refuse  to 
register  the  transfer  of  shares  by  a  minor  if  at  the  time 
of  application  for  transfer  it  has  had  no  notice  of  re- 
pudiation by  him.^"^ 

The  power  of  guardians,  executors,  ad- 
Transfer  by  •    •  J.     i.         i       x 
guardians              ministrators,  trustees  or  persons  occupy- 

executors  or  ing  other  fiduciary  relations  toward  the 
administrators.  ^     ,  ,       t  o   I.^ 

owners  or  shares,  to  dispose  oi  them  is 

not  usually  regulated  by  statute  and  as  a  rule  they  have 
power  to  transfer  title  without  having  first  obtained 
express  authority  to  do  so  from  the  court  which  con- 
trols their  appointment  and  the  administration  of  the  es- 
tates which  they  serve.  It  is  incumbent,  however,  upon 
one  who  would  acquire  title  from  or  through  an  executor, 
administrator,  guardian,  trustee  or  other  fiduciarj^  to 
carefully  scrutinize  his  authority  to  sell  and  most  desir- 
able that  he  do  so.  I  will  presently  explain  this  more 
fully. 

Alteration  of  Certificates  of  stock  are  not  affected  by 

certificates.  alteration  whether  fraudulently  made  or 

not,  and  the  owner  of  the  altered  certificate  is  not  there- 
by deprived  of  his  title  to  the  shares  of  which  it  is  the 
evidence.  The  transfer  of  an  altered  certificate  will 
convey  to  the  tranferee  a  good  title  to  the  certificate  and 
to  the  shares  originally  represented  by  it.  (U.  S.  T.  A., 
Sec.  16.) 

Pledge  of  When   a   debtor   delivers   stock   to   his 

^  °^  •  creditor  to  be  held  by  him  as  security  for 

the  payment  of  his  debt  it  is  a  pledge.  The  immediate 
transfer  of  the  certificate  is  not  then  contemplated,  for 
the  debtor  expects  to  discharge  his  obligation  to  his  cred- 
itor and  reclaim  the  shares.    It  is  made  by  the  delivery  of 

17.     Smith  vs.  Nashville,  etc.,  R.  Co.,  91  Tenn.  221,  18  S.  W.  54(5. 


348  QUASI-NEGOTIABLE  INSTRUMENTS 

the  certificate  indorsed  in  blank  or,  more  usually,  the  cer- 
tificate unindorsed  is  accompanied  by  the  power  of  attor- 
ney previously  described,  and  a  description  of  the  certifi- 
cate and  a  statement  of  the  fact  that  is  pledged  as  secur- 
ity is  incorporated  in  the  memorandum,  agreement,  or 
promissory  note  which  is  the  evidence  of  the  debt. 

The  pledgee  has  the  right,  however,  to 
franfferT/  ^^^'  surrender  the  certificate  to  the  corpora- 
certificate,  tion  for  transfer  and  obtain  a  new  one  in 
his  own  name  or  in  the  name  of  another,  but  if  he  does, 
he  will  assume  all  the  habilities  of  a  stockholder  unless 
there  is  statutory  provision  to  the  contrary.^^ 

It  is  held  in  some  States  that  the  pledgee  has  not  the 
right  to  transfer  the  shares  before  the  maturity  of  the 
debt  which  they  secure^ ^  but  where  a  transfer  is  per- 
mitted it  is  proper  for  the  corporation,  if  it  have  notice 
that  the  stock  is  held  by  the  transferee  merely  as  a 
pledge,  to  describe  the  person  to  whom  the  new  certifi- 
cate is  issued  as  "pledgee"  or  to  insert  in  the  certificate 
after  his  name  a  statement  that  it  is  held  as  collateral, 
and  if  this  is  done  the  pledgee  will  not  ordinarily  be 
liable  as  a  stockholder.^** 

Pledgee  may  The  pledgee  will  then,  after  its  trans- 

collect  dividends,  fer,  be  entitled  to  receive  dividends  on 
the  shares  during  the  continuance  of  the  pledge  of  which 
he  must,  of  course,  account  to  the  pledgor  by  proper 

18.  See  notes  10  Ann.  Cas.  783,  19  L.  R.  A.,  N.  S.  249. 
Pullman  vs!  Upton,  96  U.  S.  328,  24  U.  S.  (L.  Ed.),  818. 
Tieiney  vs.  Ledden,  143  la.  286 ,  121  N.  W.  1050 ,  21  Ann.  Cas. 

105  and  Note. 
Marshall  Field  &  Co.  vs.  Evans,  .Johnson,   Sloan   &   Co.,  106 
Minn.  85,  118  N.  W.  .55,  19  L.  R.  A.,  N.  S.  249  and  Note. 

19.  Sprcckles  vs.  Nevada  Bank,  113  Calif.  272,  45  Pae.  329 ,  54  A. 

S.  R.  348,  33  L.  R.  A.  459. 
State  vs.  Smith,  15  Oreg:on,  98,  14  Pac.  814. 

20.  Pauly  vs.  State  L.  &  T.  Co.,  165  U.  S.  606,  17  U.  S.  S.  C.  465. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        849 

credit  upon  his  dcl)t.^^     Even  if  he  has  not  secured  a 

transfer  of  the  stock  from  the  name  of  its  registered 

owner  the  pledgee  may,  by  giving  notice  of  the  pledge 

to  the  corporation,  require  it  to  pay  the  dividends  to 

him.^- 

_,,  ,  If  he  secures  the  transfer  of  the  certifi- 

Pledgee  may 

c^ote  pledged  cate  to  himself  the  pledgee  may  vote  the 
^  ^^®^'  pledged  shares  unless  the  right  to  vote  is 

reserved  by  the  ])ledgor,2^  and  when  his  interests  or  the 
interests  of  the  corporation  are  materially  affected  by 
the  manner  in  which  the  shares  may  be  voted,  the  owner 
of  the  shares,  tlie  pledgor,  may  require  that  the  pledgee 
vote  them  in  accordance  with  his  directions  and,  if  nec- 
essary, he  may  invoke  the  aid  of  a  court  of  equity  to 
reciuire  him  to  do  so  or  to  obtain  authority  to  vote  them 
himself. ^^ 

Pledge  must  be  "^'^^  pledgee  must  retain  the  stock  dur- 
retained.  ing  the  continuance  of  the  pledge.     He 

need  not  retain  actual  physical  possession  of  the  iden- 
tical certificates  pledged  to  him,  since  one  share  is  the 
equivalent  of  another,  but  he  must  have  in  his  possession 
always  the  number  of  shares  pledged.^^  He  cannot  sepa- 
rate the  pledge  from  the  debt,  or  lawfully  sell  or  repledge 

21.  Guaranty  Co.  of  N.  A.  vs.  East  Rome  Town  Co.,  96  Ga.  511, 

23   S.    E.   503. 

Gemmcll  &  Sinclair  vs.  Davis  &  Co.,  75  Md.  546. 

22.  Guaranty  Co.  of  N.  A.  vs.  East  Koine  Town  Co..  96  Ga.  511, 

23  S.  E.  503.     • 

23.  Comni.  vs.  Dalzell,  152  Pa.  217,  25  Atl.  535,  35  Am.  St.  Rep. 

040. 

Franklin  Bk.  vs.  Commercial  Bk.,  30  Oh.  St.  351,  355. 

24.  In  re  Arcus  Printing-  Co.,  1  N.  D.  434,  48  N.  W.  347. 
Hoppin  vs.  Buffum,  9  R.  I.  513,  11  Am.  Rep.  291. 
Notes  in  121  A.  S.  R.  196;  Ann.  Cas.  1912  A.  207. 
^Ventworth  Co.  vs.  French,  176  Mass.  442,  57  N.  E.  789. 

25.  Atkins  vs.  Gamble,  42  Calif.  86,  101 ;  10  Am.  Rep.  282. 
Berlin  vs.  Eddy,  33  Mo.  426. 


350  QUASI-NEGOTIABLE  INSTRUMENTS 

the  shares  during-  the  continuance  of  the  pledge  to  any 
one  with  notice. ^"^ 

Pledge  may  be  ^^  ^^^Jy  however,  assign  the  principal 

assigned.  debt  and  the  pledge  with  it,  provided  al- 

ways that  he  do  it  in  such  a  manner  that  the  pledgor  will 
not  be  deprived  of  his  right  to  redeem.  If  he  does  re- 
pledge  the  shares  one  who  takes  the  certificates,  if  they 
have  been  indorsed,  from  the  pledgee  without  notice  of 
the  pledge  will  be  fully  protected.^'  In  that  case  the 
owner  of  the  shares  can  recover  them  only  upon  paying 
the  re-pledgee  the  amount  of  his  advancement  on  the 
stock  even  if  this  exceeds  the  amount  for  which  the  shares 
were  originally  pledged.^^ 

Pledge  bv  ^^^  executor  or  administrator  has  the 

executor,  etc.  power  to  pledge  stock  belonging  to  the 
estate  Avhich  he  represents  but  one  taking  from  an  ex- 
ecutor or  administrator  for  his  own  debt  a  pledge  of 
stock  which  belongs  to  the  estate  he  represents  will  ac- 
quire no  right  to  hold  it  even  if  he  has  secured  a  transfer 
of  the  shares  upon  the  company's  books.  A  trustee, 
however,  has  no  implied  power  to  pledge  shares  held  in 
trust  and  even  if  the  instrument  creating  the  trust  grants 
the  power  to  sell,  no  power  to  pledge  is  thereby  implied.-^ 

Upon  maturitv  of  the  debt,  if  it  is  not 
Pledgee's   reme- 
dies when  debt      paid,  the  pledgee  may  proceed  to  sell  the 

is  not  paid.  shares   pledged   to    secure   it.     He   may 

26.  Lawrence  vs.  Maxwell.  53  N.  Y.  19. 

Dykers  vs.  Allen,  7  Hill  (N.  Y.),  497,  42  Ann.  Dec.  87. 
Van  Eaman  vs.  Stanchfield,  13  Minn.  75. 
Easton  vs.  Hodges,  18  Fed.  677,  683. 

27.  Wood's  Appeal,  92  Pa.  St.  379,  37  Am.  Rep.  694. 
Coit  vs  Humbei-t,  5  Calif.  260,  63  Am.  Dec.  128. 

28.  Wood's  Appeal,  92  Pa.  St.  379,  37  Am.  Rep.  694. 
Shattuck  vs.  Am.   Cement   Co.,  205  Pa.   St.  197,  54  Atl.   785, 

97  A.  S.  R.  735. 
McNeil  vs.  Tenth  Nat '1  Bank,  46  N.  Y.  325,  7  A  in.  Rep.  .341. 

29.  Patterson  Fir^t  Nat'l  Bank  vs.  Nat'l  Broadwav  Bk.,  156  N.  Y. 

459,  51  N  E.  398,  42  L.  R.  A.  139. 


.  TRANSFER  OF  CERTIFICATES  OF  STOCK        .'^')1 

either  proceed  in  equity  to  foreclose  his  lien  and  sell  the 
pledge^"  or  he  may  give  notice  to  the  pledgor  of  his  in- 
tention to  sell  the  shares  and  proceed  to  sell  without 
any  judicial  proceedings.^^  The  latter  course  is  usually 
pursued  but  the  pledgee  need  not  do  either  and  if  he  does 
not,  and  the  value  of  the  securities  pledged  declines,  he 
is  not  liable  to  their  owner  by  reason  of  their  deprecia- 
tion. His  third  remedy  is  to  proceed  upon  the  debt  as 
a  creditor  of  the  pledgor  and  when  it  is  reduced  to  judg- 
ment he  may  cause  the  pledge  to  be  sold  upon  execution 
or  attachment  and  apply  the  proceeds  to  the  satisfaction 
of  his  claim.^^ 

Pledgor  entitled  ^^  ^^  determines  to  pursue  the  second 
to  notice  of  sale,  method  and  sell  the  pledge  without  pro- 
ceedings in  a  court,  the  pledgee  must  give  the  pledgor 
personal  notice  of  his  intention  to  sell  and  of  the  time 
and  place  at  which  the  pledge  will  be  sold  and  the  manner 
in  which  it  will  be  offered.  It  must  be  offered  at  public 
sale  unless  a  private  sale  is  expressly  authorized  by  the 
pledgor.  By  an  express  agreement  the  pledgor  may 
waive  notice  of  the  sale.  Except  by  express  agreement 
the  sale  may  not  be  made  upon  any  stock  exchange  at 
which  the  right  to  bid  is  limited  to  its  members.^^ 

^,  ,  ^      In    the    absence    of   express    authority 

Pledgee  may  not  ^  -' 

buy  at  his  own  from  the  pledgor  the  pledgee  may  not 
^^^®'  purchase  the  shares  at  his  own  sale  under 

this  form  of  procedure  to  sell  the  pledge.  This  rule  is 
based  upon  the  principle  that  to  permit  the  pledgee  to 
do  so  would  afford  him  an  opportunity  to  use  his  posi- 
tion to  his  own  advantage  by  so  conducting  the  sale  that 
he  might  be  enabled  to  purchase  the  shares  at  a  price 

30.  Note,  121  A.  S.  R.  205. 

31.  Note  in  121  A.  S.  R.  200. 

32.  Note  121  A.  S.  R.  204. 

33.  Brass  vs.  Worth,  40  Barb.  (N.  Y.)  648,  654. 


352  QUASI-NEGOTIABLE  INSTRUMENTS 

below  their  real  value.^^  Such  a  sale  will  be  very  care- 
fully scrutinized  and  though  the  purchase,  either  directly 
or  indirectly,  by  the  pledgee  at  his  own  sale  is  not  void, 
it  is  voidable  by  the  pledgor.^^ 

The  risk  in  "^^^^  subject  which  I  have  been  endeav- 

purchasing  stock,  oring  to  explain  is  almost  inexhaustible 
by  reason  of  the  varied  complications  Avhich  may  arise 
in  the  transfer  of  certificates  of  stock  and  by  reason  of 
conflicting  laws  and  decisions  interpreting  their  applica- 
tion, but  those  essentials  to  a  valid  negotiation  which 
men  purchasing  and  selling  validly  issued  stocks,  or 
dealing  in  them  as  pledges,  ought  to  know,  can  be  briefly 
discussed  as  follows: 

„     -        .  One  of  two  or  more  joint  owners  cannot 

Purchase  from  '' 

partners.       sell  or  pledge  stock  standing  in  their  joint 

names,  in  the  absence  of  express  authority  of  the  others ; 
but  one  partner  in  a  trading  co-partnership,  including 
one  formed  for  trading  in  stocks,  can  sell  or  pledge  stock 
appearing  to  be  in  the  partnership  name.  The  contrary 
is  the  rule  when  the  partners  are  associated  together  in 
a  non-trading  co-partnership.^*' 

A  director  or  officer  of  a  corporation 

PiiToTiJi^G   from  • 

officer  or  director  i^i^ij  tleal  in  its  stock  and  information  or 
of  corporation,  knowledge  of  its  value  which  he  has  by 
reason  of  his  familiarity  with  the  affairs  of  the  company 
he  represents  will  not  affect  the  validity  of  the  trans- 
action ;  and  if  he  makes  no  misrepresentation  to  or  does 
not  actively  mislead  the  person  from  whom  he  buys,  or 
to  whom  he  sells,  the  transaction  cannot  be  attacked  for 
fraud  even  though  he  may  gain  some  advantage  by  rea- 
son of  his  superior  knowledge  or  position. ^'^ 

34.  Note  121  A.  S.  R.  203. 

35.  Note  121  A.  S.  R.  203. 

36.  Moynahan  vs.  Prentiss,  10  Colo.  App.  295,  51  Pac  94. 

37.  Crowell  vs.  Jackson,  53  N.  J.  L.  656. 
Krumbhaar  vs.  Griffiths.  151  Pa.  St.  223. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        :}53 

One  who  purchases  stock  at  a  sale  by 
sheriff,  assignee  the  sheriff  under  execution  or  attachment, 
or  bankrupt  sale.  qj.  purchases  at  an  assignee's  sale,  or  a 
sale  in  bankruptcy,  is  exposed  to  the  risk  that  the  legal 
title  to  the  shares  may  be  in  another  unless  the  certifi- 
cates themselves  are  produced  at  the  sale.  I  have  pointed 
out  previously  tliat  it  is  under  such  circumstances  and 
at  such  sales  that  the  convict  between  claimants  to 
shares  which  have  been  sold  m'  pledged  but  not  trans- 
ferred on  the  records  of  the  company  usually  occur. 
Since  most  courts  now  hold  that  shares  are  not  held 
under  attachment  or  execution  by  the  sheriff  unless  he 
seize  actual  physical  possession  of  the  certificates,  or  the 
laws  of  most  States  so  provide,  (U.  S.  T.  A.,  Sec.  13) 
much  of  the  danger  of  purchasing  at  such  sales  has  been 
eliminated.  An  assignee  or  trustee  in  bankruptcy  can 
convey  a  good  title  if  he  delivers  the  certificates  to  the 
purchaser  at  his  sale  but  there  is  risk,  if  the  certificates 
are  not  in  his  possession,  that  they  may  have  been  al- 
ready pledged  or  sold  by  the  assignor  or  bankrupt  to 
another  who  would  take  a  better  title  than  the  purchaser 
at  such  a  sale.     (U.  S.  T.  A.,  Sec.  4.) 

The  sale  of  pledged  stock  by  the  pledgee 
Purchase  from  i   ,  •  i  /?  7 

pledgee  or  taking  conveys  a  good  title  10  a  bona  fide  pur- 

repiedge.  chaser  for  value,  free  from  the  claims  of 

the  pledgor  and  of  creditors  even  if  the  transfer  to  the 

pledgee  is  not  recorded  on  the  company's  books. ^^    But 

if  the  purchaser  knows  that  the  stock  he  purchases  is 

held  by  his  vendor  merely  as  a  pledge  he  will  not  be  a 

bona  fide  purchaser,  unless  he  purchases  at  a  sale  made 

to  satisfy  the  conditions  of  the  pledge.^®     If  one  take 

38.  Coit  vs.  Humbert,  5  Calif.  260.  63  Ann.  Dec.  128. 
McNeil  vs.  Tenth  Nat.  Bank,  46  N.  Y.  325. 
Westino'house  vs.  German,  etc..  Bank,  196  Pa.  St.  249. 

39.  Westine;liouse  vs.   German,  etc.,  Bank,  188  Pa.   St.  630. 
Ryman'vs.  Gerlach,  153  Pa.  St.  197. 


354  QUASI-NEGOTIABLE  INSTRUMENTS 

from  another  as  a  pledge  stock  which  he  knows  has  been 
pledged  to  him  by  its  owner  he  will  not  obtain  its  legal 
title  but  will  hold  it  subject  to  the  right  of  its  owner  to 
reclaim  it.^*^  The  right  to  reclaim  the  stock  exists  in 
its  owner  in  either  of  these  cases  if  he  could  originally 
reclaim  it  from  the  one  to  whom  he  pledged  it.  However, 
the  owner  would  be  obliged  to  pay  the  repledgee  or  the 
purchaser  from  the  original  pledgee,  purchasing  with 
knowledge  of  the  pledge,  the  amount  of  his  obligation 
upon  the  original  pledge  before  becoming  entitled  to  re- 
claim the  shares.^ ^  The  rules  which  govern  the  transfer 
of  stock  as  they  are  given  in  this  treatment  of  the  sub- 
ject are  all  applical)le  to  its  transfer  by  one  who  holds  it 
in  pledge  but  one  dealing  with  an  agent  or  trustee  know- 
ing him  to  be  employed  to  sell  shares  belonging  to  an- 
other cannot  lawfully  accept  such  shares  in  pledge  from 
him,  although  a  sale  by  the  agent  would  convey  the  title.*- 

One  of  the  first  duties  of  an  executor  or 
Purchase  from  .    .  ,.        i  i  , 

executor  or  administrator  oi  a  deceased  person's  es- 

administrator.  ^^^g  j^g  f^^  convert  the  personal  property 
in  his  charge  into  money.  He  therefore  has  a  right  to 
sell  shares  of  stock  belonging  to  the  estate  wiiich  he  has 
been  appointed  to  administer.  The  laws  governing  the 
administration  of  estates  provide  in  what  manner  the 
personal  property  in  the  hands  of  the  executor  adminis- 
trator must  or  may  be  sold  and  although  it  is  asserted, 
and  rightly,  except  where  it  may  be  otherwise  provided 
by  statute,  that  an  order  of  court  is  unnecessary  to  em- 
power an  administrator  or  executor  to  sell  shares  be- 


40.  Gorman  Sav.   Bk.  vs.  Renshaw,  78  Md.  475. 

41.  Chamberlain  vs.  Greenleaf,  4  Abb.  N.  Cas.  178,  182. 

42.  Patterson  First  Nat'l  Bank  vs.  Nat'l  Broadway  Bk.,  156  N. 

Y.  459,  51  N.  E.  398,  42  L.  R.  A.  139. 
Loring:  vs.  Brodie,  134  Mass.  45;'. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        355 

longing  to  his  decedent's  estate/^  the  purchaser  will  ex- 
ercise a  wise  precaution  to  insist  that  such  authority 
shall  be  obtained  and  that  he  be  provided  with  a  certified 
copy  of  the  order  and  the  letters  of  appointment  of  the 
executor  or  administrator,  in  order  to  facilitate  the  trans- 
fer of  tlie  shares  upon  the  books  of  the  corporation. 
Purchase  from  '^^^^  duties  of  guardians  in  respect  to 

Guardian.  the  sale  of  shares  belonging  to  their  wards 

and  their  right  to  sell  and  transfer  the  certificates  which 
they  hold  in  a  representative  capacity  is  likewise  regu- 
lated by  statute.  As  in  the  case  of  executors  and  adminis- 
trators one  purchasing  from  a  guardian,  to  be  fully  pro- 
tected and  to  assist  in  protecting  the  interests  of  the  es- 
tate, ought,  as  a  rule,  to  accept  a  transfer  only  when  the 
sale  has  been  made  after  proper  authorization  by  the 
court  which  controls  the  administration  of  the  estate 
which  he  serves,  and  to  require  the  production  of  the 
order  under  which  the  sale  is  directed  and  a  certified  copy 
of  the  appointment,  although  there  is  ample  and  good 
authority  to  support  the  right  of  a  guardian  to  sell 
without  it.^^ 

Purchase  from  <  ^^^^   purchasing  from   a   trustee   stock 

trustee.  which  he  knows  the  vendor  holds  as  a  part 

of  the  trust  estate  is  obliged  to  ascertain  whether  the 
trustee  is  given  power  to  sell  by  the  instrument  creating 
the  trust.^^'  In  the  absence  of  knowledge  or  notice  that  the 
stock  offered  is  trust  estate  stock  the  buyer  will,  however, 
be  regarded  as  a  bona  fide  purchaser  and  entitled  to  its 

43.  See  Note  45  L.  R.  A..  N.  S.  1079. 
Leitch  vs.  Wells,  48  N.  Y.  585. 
Prall  vs.  Tilt,  27  N.  J.  Eq.  393. 
Wood's  Appeal,  92  Pa.  St.  379. 

44.  Lamar  vs.  Micou,  112  U.  S.  452,  475. 

Bank  of  Virpnia  vs.  Craig,  G  Leigh  (Va.),  399,  432.  > 

Gardner  vs.  Beacon  Trust  Co.,  190  Mass.,  27.  i 

45.  Patterson  First  Nat.  Bk.  vs.  Broadway  Bk.,  156  N.  Y.  499. 


356  QUASI-NEGOTIABLE  INSTRUMENTS 

transfer.^'^  Notice  is  actual  knowledge  of  or  a  duty  to 
know  any  facts  which  would  cause  an  ordinarily  prudent 
and  intelligent  man  to  make  inquiry  to  learn  whether  the 
stock  belongs  to  a  trust  estate,  and  to  learn  whether  a 
power  to  sell  is  granted  by  the  instr anient  creating  the 
trust.  The  fact  that  the  certificate  is  made  out  in  the 
name  of  a  person  as  ' '  trustee, ' '  or  if  other  words  are  used 
which  indicate  an  ownership  in  a  trust  capacity,  will  be  re- 
garded as  notice.^^  If  there  is  more  than  one  trustee 
all  must  sign  the  transfer  and,  as  a  rule,  the  corporation 
will  require  that  the  instrument  creating  the  trust  shall 
be  exhibited.    It  ought  to,  for  its  own  protection."*^ 

One  purchasing  lost  or  stolen  certifi- 
Purchase  of  lost         ^  .  ■    ^  ^  i      J^^     •     j.  c 

or  stolen  cer-         cates  acquires  no  right  to  their  transfer 

tificates.  if  they  are  unindorsed,  and  even  if  they 

are  indorsed  in  blank;  nor  does  any  one  who  purchases 
from  or  acquires  through  him  these  identical  certifi- 
cates.-"^   (U.  S.  T.  A.,  Sec.  7.) 

In  this  respect  certificates  of  stock  lack  one  of  the 
most  marked  qualities  of  negotiable  paper  for,  under 
similar  circumstances,  anyone  taking  for  value  and  with- 
out notice  a  bill,  note  or  check,  complete  in  every  other 
respect  except  delivery,  would  own  and  could  enforce  it. 
But,  you  see,  that  quality  of  negotiability  is  not  imparted 
to  certificates  of  stock  and  no  purchaser,  even  for  value 
without  notice,  could  acquire  title  to  the  lost  or  stolen 
certificate.  However,  if  one  has  procured  the  transfer  of 
a  certificate  ^^  hich,  bearing  a  blank  indorsement,  had  been 


4(i.     Hushes  vs.  Drovers,  etc.,  Bk.   (Md.),  38  Atl.  936. 

47.     See  Notes  45  L.  R.  A.  (N.  S.)  1078;  15  L.  R.  A.  643. 

Gevser-Marion  Gold  Min.  Co.  vs.  Stark,  106  Fed.  558,  45  C.  C. 

A.  467,  53  L.  R.  A.  684. 
Marbury  vs.  Ehlen,  72  Md.  206,  19  Atl.  648,  20  A.  S.  R.  467. 

48     Bayard  vs.  Farmers,  etc.,  Bk.,  52  Pa.  St.  232. 
49.     East  Birmingham  Land  Co.  vs.  Dennis,  85  Ala.  565. 
Knox  vs.  Eden  Mus.,  etc.,  Co.,  148  X.  Y.  441. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        :Jo7 

lost  or  stolen,  and  receives  a  new  certificate  in  its  place, 
whether  he  be  the  finder  or  thief,  or  some  one  who  pur- 
chased from  the  finder  or  thief,  and  transfers  this  new 
certificate  for  value  to  a  bona  fide  transferee  without 
notice  of  the  manner  in  which  it  was  obtained,  his  trans- 
feree and  subsequent  transferees  acquire  the  legal  and 
indefeasible  title  to  the  shares  represented  in  the  new 
certificate.^"     (U.  S.  T.  A.,  Sec.  8.) 

Since,  as  you  have  observed,  the  holder  of  certificates 
which  have  been  assigned  to  him  or  to  another  whom  he 
represents,  and  the  transferer  likewise,  has  the  right 
to  require  the  corporation  to  transfer  the  shares  upon 
its  books,  some  inquiry  seems  fitting  into  the  duty  of  the 
corporation  to  make  the  transfer  and  to  determine  what 
are  the  rights  of  the  company  in  respect  to  the  changes 
in  its  membership  by  the  barter  and  sale  of  its  shares. 

The  corporation  may  refuse  transfer  except  upon  com- 
pliance with  its  rules  for  transfer,  unless  these  are  con- 
refuse  transfer,  trary  to  law,  but  it  cannot  justify  a  re- 
Corporation  may  "^"-'^''^  ^^  ^^^^^  ^^^^  transfer  on  the  ground 
that  it  has  been  requested  to  refuse  transfer  by  a  for- 
mer owner  of  the  shares. ^^  Unless  its  charter  or  the 
statutes  under  which  it  is  incorporated  give  it  that  right, 
the  corporation  may  not  refuse  transfer  for  the  reason 
that  a  part  of  the  subscription  price  remains  unpaid  or 
that  a  call  for  an  assessment  or  part  of  the  subscription 
is  due  and  has  been  made  upon  the  shares  and  the  pay- 
ment called  remains  unpaid/''-     The  transferer  remains 

50.  Machinists  Nat.  Bk.  vs.  Field,  126  Mass.  345. 

Mandelbaiim   vs.   North  Am.  Min.   Co.,  4  Mich.  465. 

51.  0  'Neil  vs.  Wolcott  Min.  Co.,  174  Fed.  527,  98  C.  C.  A.  309.  27 

L.  R.  A.,  N.  S.  200  and  Note. 
Bond  vs.  Mt.  Hope  Iron  Co.,  99  Mass.  505,  97  Am.  Dec.  49. 
Mundt  vs.  Commercial  Nat.  Bk.,  35  Utah  90.  99  Pac.  454,  136 

A.   S.  R.  1023. 

52.  Crai^:  vs.  Hesperia  Land   Etc.   Co.,   113   Cal.   7,  45  Pac.   10, 

54  A.  S.  R.  316.  35  L.  R.  A.  306 


358  QUASI-NEGOTIABLE  INSTRUMENTS 

liable  for  payments  called  before  the  transfer  but  is  not, 
as  a  rule,  liable  upon  those  called  afterward.  The  cor- 
poration may  refuse  transfer  of  its  shares  if,  on  the  eve 
of  insolvency,  a .  shareholder  presents  his  shares  for 
transfer  with  a  view  to  escape  liability  to  its  creditors, 
and  may  refuse  transfer  to  protect  itself  from  fraud.^* 
It  may  also  refuse  transfer  to  or  by  infants  or  per- 
sons under  other  legal  disability  unless  made  in  the  name 
of  the  duly  appointed  guardian,  and  may 

Transfers  to  or  require  the  application  for  transfer  to  be 
by  infants  or  per-  ,  „  „ 

sons  under  accompanied  by  a  certmed  copy  oi  the 

disability.  guardian's  appointment,  but  a  sale  by  a 

minor  not  being  void  but  voidable  only,  it  has  also  been 
held  that  the  corporation  must  make  the  transfer  upon 
an  assignment  of  shares  by  an  infant  unless  at  the  date 
of  the  application  it  had  already  been  repudiated  by 
him.^'"' 

Similarly,  transfers  by  executors  or  administrators 
may  be  refused  by  the  corporation  unless  accompanied 
by  a  certified  copy  of  appointment.  The 
Transfers  by  transfer  of  the  shares  from  the  deceased 
administrators  owner  may  be  made  to  the  executor  or 
and  guardians.  administrator  as  such,  or  it  may  be  made 
directly  to  one  who  has  purchased  from  him  when  his 
qualification  is  shown.  The  corporation  is  not  required 
to  look  into  the  necessity  to  sell  the  shares  in  order  to  pay 
the  debts  of  the  decedent's  estate^^  nor  to  look  to  the  ap- 
plication to  be  made  by  the  executor  or  administrator  of 
the  proceeds  of  their  sale.^«    It  cannot  require  the  pro- 

53.  Note,  136  A.  S.  R.  1030,  1031,  1033. 

54.  Smith  vs.  Nashville  Etc.  R.  R.  Co.,  91  Teun.  221,  18  S.  W.  546. 

55.  Bayard  vs.  Farmers  Bk.,  52  Pa.  St.  232. 
Peck  vs.  Providence  Gas  Co.,  17  R.  I.  275. 

56.  Hutchins  vs.  State  Bank,  12  Mete.   (Mass.)  421. 
Leiteli  vs.  Wells,  48  N.  Y.  585. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        359 

duction  of  the  order  to  sell,  for  none  is  required.  But  if 
the  corporation  have  actual  knowledge  through  its  of- 
ficers, that  a  breach  of  trust  of  misuse  of  the  stock  or 
its  proceeds  is  contemplated  by  the  executor  or  adminis- 
trator it  is  its  duty  to  refuse  the  transfer.  If  it  never- 
theless permit  the  transfer  it  will  be  liable  to  the  estate 
for  any  loss  it  may  sustain.^'  If  the  executor  apply  for 
transfer  of  stock  which  the  corporation  knows  has  been 
specifically  bequeathed  it  must  allow  the  transfer,  since 
the  proceeds  of  the  shares  might  be  required  to  pay  the 
decedent's  debts.  However,  such  knowledge  might  very 
well  be  regarded  as  sufficient  justification  to  require  the 
production  of  an  order  of  court  for  the  sale  or  transfer 
of  the  shares  and  to  excite  the  inquisitorial  activities 
sometimes  required  of  the  corporation  to  investigate  the 
authority  to  transfer  when  the  rights  of  claimants  seem 
to  conflict,  and  would  authorize  the  corporation  to  delay 
transfer  for  such  reasonable  time  as  it  may  require  to 
determine  its  duty  in  the  matter.  The  foregoing  applies 
equally  to  sales  by  guardians  who,  however,  more  fre- 
quently than  do  executors  and  administrators,  obtain 
and  present  authority  of  court  for  the  sale  of  shares 
which  they  hold  for  their  wards. ^^ 

It  is  the  duty  of  the  corporation  to  refuse  transfer  by 
a  trustee  unless  it  knows  that  the  transfer  is  authorized 
Transfer  by  ^^7  ^^^^  instrument  creating  the  trust  and 

trustees.  has    been    executed   by    all   the    trustees 

whose  signatures  it  requires.^"'  If  it  permit  the  transfer 
of  trust  stock  by  one  who  has  no  right  to  make  it  or  whose 
right  is  not  complete,  the  corporation  w411  be  liable  to  the 

57.  Lowry   vs.    Conuuercial   &    Farmers   Bank,   15   Fed.    Cas.    No. 

8581. 
Stewart  vs.  Fireman's  Ins.  Co.,  53  Md.  564.  576. 

58.  Gardner  vs.  Beacon  Trust  Co.,  190  Mass.  27. 

59.  Note,  15  L.  K.  A.  {)43,  45  L.  R.  A.,  N.  8.  1078,  Ann.  Cas.  1913, 

E.   1175 


360  QUASI-NEGOTIABLE  INSTRUMENTS 

trust  estate  and  may  be  compelled  to  replace  the  stock  or 
respond  in  damages  when  the  transfer  has  been  made  by 
the  trustee  in  breach  of  his  trust,  and  its  negligence  is  the 
cause  of  any  loss  sustained  by  the  person  for  whose 
benefit  the  shares  are  held  in  trust.^°  It  should,  there- 
fore, require  always  that  the  certificates  presented  for 
transfer  be  accompanied  by  the  instrument  creating  the 
trust  or  that  it  be  exhibited  to  the  transfer  officer.®^ 

It  is  negligence  on  the  part  of  the  corporation  to  al- 
low a  transfer  without  a  surrender  of  the  certificate  for 
CorForation  the  shares  properly  indorsed  or  accom- 

surrender  of  panied  by  proper  authority  to  make  the 

certificate.  transfer.    If  this  breach  of  its  duty  result 

in  damage  to  one  who  is  a  bona  fide  holder  of  the  old  cer- 
tificate it  will  be  liable  to  him  and  obliged  to  respond  to 
him  for  his  loss.^-  Even  if  a  new  certificate  has  been 
issued  under  an  order  duly  made  by  a  court  after  a  bona 
fide  contest  by  the  corporation,  to  replace  one  which  has 
been  lost  or  stolen,  the  corporation  is  not  relieved  of  lia- 
bility to  the  holder  of  the  old  certificate.  Its  interests  and 
those  of  a  subsequent  bona  fide  purchaser  of  the  lost  or 
stolen  certificate  are  usually  protected  by  a  bond  of  in- 
demnity ordinarily  required  by  the  court  to  be  given  by 
the  person  sviio  invokes  its  aid  to  obtain  a  new  certificate 
in  place  of  one  which  has  been  lost.  (U.  S.  T.  A.,  Sec.  17.) 
And  if  one  fraudulently  procures  the  issue  of  a  new  cer- 
tificate, dishonestly  claiming  to  have  lost  or  destroyed 
the  old  one  which  it  replaces,  when  in  fact  he  has  sold 

60.  Note,  45  L.  R.  A..  N.  S.  1079. 

Citizens  Bk.  vs.  Robbins,  128  Iiul.  449,  26  N.  E.  116. 
Marbiuy  vs.  Ehlen.  72  Md.  206,  19  Atl.  648. 
Wooten  vs.  Wilminoton  &  W.  R.  Co.,  128  N.  C.  119:  38  S.  E. 
298. 

61.  Bayard  vs.  Farmers,  etc.,  Bank,  52  Pa.  St.  232. 

62.  Factors  Ins.  Co.  vs.  Marine,  etc..  Co.,  31  La.  Ann.  149. 
Snpplv  Ditch  Co.  vs.  Elliot,  10  Colo.,  327,  15  Pac.  691,  3  Am. 

St.  Rep.  166,  11  L.  R.  A.  125. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        361 

it,  the  owner  of  the  old  certificate,  if  he  is  without  notice 
of  the  proceedings,  is  then  entitled  to  the  transfer  to 
him  of  the  shares  which  he  holds  and  the  corporation  is 
required  to  look  to  the  bond  for  its  indemnity.^^ 

A  court's  decree  in  an  action  wherein  it  has  the  power 
to  order  the  issue  of  a  new  certificate  or  the  cancellation 

of  one  issued  by  the  corporation,  must, 
'Py'o jicf OT"  ijY  order 

of  court  in  other  of  course,  be  obeyed.  Ordinarily  a  court 
'^^ses.  y^j[\i  jjQ^  enter  a  decree  by  which  the  cor- 

poration may  be  exposed  to  the  danger  of  loss  or  injury 
without  providing  at  the  same  time  for  its  adequate  in- 
demnity. Where  there  are  rival  claimants  to  a  certifi- 
cate the  laws  of  all  states  provide  that  the  corporation, 
if  it  is  unable  to  determine  to  whom  the  certificate  ought 
to  be  issued,  or  by  whom  it  ought  to  be  transferred,  may 
invoke  the  aid  of  a  court  in  an  action  of  interpleader  and 
require  the  claimants  to  submit  their  contention  to  the 
court  for  adjudication  if  there  is  a  reasonable  doubt  as 
to  which  one  is  entitled  to  the  shares.  A  corporation 
which  undertakes  to  determine  the  rights  of  rival  claim- 
ants without  interpleader  voluntarily  assumes  a  respon- 
sibility it  is  not  required  to  take.  If  by  a  mistaken  con- 
clusion or  opinion  of  the  law  its  disposition  of  the  rights 
of  the  contending  claimants  to  the  shares  is  not  sustain- 
able in  law,  one  w^ho  is  thereby  injuriously  affected  may 
compel  it  to  respond  in  damages. 

A  forged  signature  or  one  made  without  authority  is 
inoperative.    It  conveys  no  right  to  the  certificate  or  the 

««.  i.  *  +^o«e  shares  it  represents.  Even  if  the  trans- 
Effect  of  trans-  ^ 

fer  on  forged  fer  has  been  made  upon  an  assignment 
ignature.  ^^f  ^^^  shares  to  which  the  signature  has 

been  forged  the  new  certificate  does  not  replace  the  old  one. 

63.     Cleveland,  etcc,  R.  R.  Co.  vs;  Robbins,  35  0.  S.  483. 
Brisbane  vs.  Delaw,  etc.,  R.  R.  Co.,  94  N.,Y.  204. 


362  QUASI-NEGOTIABLE  INSTRUMENTS 

The  corporation  is  obliged  to  know  the  genuineness  of 
the  signature  of  its  stockholders  and  if  it  is  not  certain 
that  the  signature  presented  is  genuine  it  has  the  right 
to  require  the  person  applying  for  transfer  to  produce 
satisfactory  proof  that  the  signature  is  what  it  purports 
to  be.''^ 

If,  notwithstanding  this  adequate  means  of  protecting 
itself,  the  corporation  permits  a  registry  upon  a  forged 
transfer  it  not  only  does  not  deprive  the  real  owner  of 
his  shares  but  it  cannot  cancel  the  registration  of  the 
new  certificate  if  it  has  passed  into  the  possession  of  a 
transferee  who  took  it  mediately  or  immediately,  Avithout 
notice,  in  good  faith  and  for  value,  from  the  holder  who 
procured  its  transfer.  In  that  situation  the  owner  of 
the  shares  may  require  the  corporation  to  replace  those 
transferred  upon  his  forged  signature,  even  requiring 
that  it  enter  the  market,  if  necessary,  and  buy  others  if 
the  original  shares  cannot  be  restored.*^^  He  usually 
prays  for  alternative  relief  in  damages,  however,  and  it 
is  damages,  as  a  rule,  that  the  corporation  is  required 
to  pay. 

For  a  general  understanding  of  the  incidents  of  stock 
ownership  and  transfer  the  explanations  I  have  given  of 
the  law  will  usually  suffice  for  ordinary  necessities.  This 
subject,  like  those  which  precede  it,  has  been  treated  for 
the  benefit  of  persons  who  are  interested  in  obtaining  a 
salutary  knowledge  of  the  important  provisions  of  the 
law  upon  these  business  instruments,  and  I  hope  the 
book  will  enable  many  to  free  themselves  from  uneasy 
doubts  upon  the  certainty  and  safety  of  their  possession 

64.     Telegraph  Co.  vs.  Davenport,  97  U.  S.  369. 
65      Machinists  Nat.  Bank  vs.  Fiekl,  126  Mass.  345. 

Pratt  vs.  Boston,  etc.,  K.  R.  Co.,  126  Mass.  443. 

Pratt  vs.  Machinists  Nat.  Bk.,  123  Mass.  110. 

Boston,  etc.,  R.  R.  Co.  vs.  Richardsdon,  135  Mass.  473. 


TRANSFER  OF  CERTIFICATES  OF  STOCK        -363 

and  titles  to  the  business  paper  and   securities  which 
they  hold. 

Now,  in  conclusion,  the  writer  expresses  the  hope  that 
this  volume  will  be  of  use  to  business  men,  and  to  young 
men  getting  a  business  education.  Whatever  may  be 
the  merit  of  the  explanations  which  have  been  offered  of 
these  laws,  particularly  of  the  Uniform  Negotiable  In- 
struments Law,  that  Act  may  be  regarded  as  the  most 
remarkable  statute  ever  enacted  and  it  ought  to  be  fa- 
miliar to  every  man.  The  best  legal  talent  was  freely 
expended,  gratuitously,  in  its  preparation.  It  has  been 
in  force  in  some  of  the  States  for  nearly  twenty  years. 
During  that  time  suggestions  for  its  amendment  were 
made  at  more  than  one  annual  Conference  of  the 
Commissioner  on  Uniform  State  Laws,  made  up  now  of 
representatives  of  nearly  all  of  the  States,  but  the  amend- 
ments proposed  and  freely  discussed  at  these  Confer- 
ences were  not  deemed  desirable  and  were  not  made. 
The  courts  have  very  generally  recognized  its  inten- 
tion to  make  uniform  the  law  upon  its  subject  and, 
w^ith  few  exceptions,  whenever  there  has  been  conflict 
between  its  provisions  and  prior  judicial  interpretation 
of  the  common  law  they  have  not  hesitated  to  interpret 
the  Act  without  reference  to  the  state  of  the  law  as  it 
was  before  its  enactment. 

Most  of  the  needs  of  the  business  man  for  legal  ad- 
vice upon  his  commercial  paper  and  most  of  his  doubts 
concerning  his  rights  and  duties  upon  such  contracts 
can  be  readily  answered  by  reference  to  the  Act  itself 
and  technical  skill  is  not  now  so  much  as  formerly  re- 
quired of  the  lawyer  in  giving  advice  upon  this  sub- 
ject since  the  law  has  been  so  admirably  written. 
The  subtleties  of  the  many  questions  which  will  con- 
tinue to  arise  to  confound  the  business  man,  and  the 


364  QUASI-NEGOTIABLE  INSTRUMENTS 

lawyer  as  well,  will  not  allow  that  any  volume  upon  the 
subject  can  or  will  be  written  which  will  provide  a  ready 
answer  for  every  difficulty  it  may  become  necessary  to 
meet.  But  if  the  book  is  used  for  frequent  reieixnce  to 
the  law,  with  which  every  business  man  ought  xo  make 
himself  thoroughly  familiar,  his  knowledge  of  what  to 
do  in  order  to  prevent  loss  upon  his  commercial  paper 
and  of  when  and  how  to  do  it  will  suffice  for  most  of  his 
ordinary  needs  and  dispense  with  much  unsatisfactory 
conflict  and  litigation  now  so  frequent  from  a  lack  of 
this  knowledge.  The  brief  analyses  of  the  principles  of 
the  laws  governing  Bills  of  Lading,  Warehouse  Receipts 
and  the  transfer  of  Certificates  of  Stock  are  designed, 
likewise,  to  enable  men  who  handle  or  deal  in  these  in- 
struments to  better  understand  their  nature  and  the 
principal  provisions  of  the  laws  which  govern  their  in- 
terpretation and  the  rights  and  liabilities  of  their  parties. 


APPENDIX  365 


APPENDIX. 


Wherein  Will  Be  Found  the  Changes  in  the  Law  Made 
BY  Some  of  the  States, 


Alabama. 

Sec.  4-9.  The  words  "said  holder"  are  substituted  for 
'' transfer er"  at  the  end  of  the  first  sentence.  At  the  end 
of  the  section  these  words  are  added:  ''for  the  purpose 
of  transferring  title  only." 

Sec.  58.  All  of  the  last  sentence  between  the  words 
''such"  and  "latter"  are  omitted  from  the  second  sen- 
tence of  this  section. 

ApiZONA. 

Sec.  85.  The  last  sentence,  beginning  with  the  words, 
"instruments  falling  due,"  is  omitted  from  the  Act. 

Sec.  146.  The  last  sentence  relating  to  Saturday  when 
not  a  holiday  is  omitted. 

Sec.  195.     The  Act  omits  this  section. 

Arkansas. 
Sec.  98.     In  the  last  sentence  the  words,  "must  he  sent 
by  mail,"  are  substituted  for  "may  he  sent." 

Colorado. 

Sec.  49.  The  Act  adds  these  words  to  the  first  sen- 
tence, "if  omitted  hy  mistake,  accident  or  fraud." 

Sec.  61.  The  Act  omits  the  word  " suh sequent"  be- 
fore "indorser"  near  the  end  of  the  first  sentence. 

Sec.  85.     The  third  sentence,  beginning  "instrmnents 


366  APPENDIX 

falling  due"  is  omitted  from  the  Act  in  this  State  and 
this  substituted:  ''instruments  falling  due  on  any  day, 
in  any  place  where  any  part  of  such  day  is  a  holiday,  are 
to  be  presented  for  payment  on  the  next  succeeding  busi- 
ness day,  except  that  su^h  instruments  payable  on  de- 
mand may,  at  the  option  of  the  holder,  be  presented  for 
payment  during  reasonable  hours  of  the  part  of  such  day 
which  is  not  a  holiday." 

Sec.  146.  The  last  sentence  is  omitted  and  this  sub- 
stituted: "When  any  day  is  in  part  a  holiday  present- 
ment for  acceptance  may  be  made  during  reasonable 
hours  of  the  part  of  such  day  which  is  not  a  holiday." 

Delawaee. 
Sec.  85.     The  words  "or  becoming  payable"  are  in- 
serted in  parentheses  near  the  beginning  of  the  third 
sentence  after  the  words  "instruments  falling  due." 

Idaho. 

Sec.  2.    In  Sub-section  3  the  words  "or  of  interest" 

are  omitted. 

Illinois. 

Sec.  5.  The  Act  adds  "under  this  Act"  after  the  last 
word  of  the  first  sentence;  it  also  omits  all  of  Sub-section 
2  following  the  word  "judgment." 

Sec.  6.  At  the  beginning  of  Sub-section  5  before  the 
word  "designates"  these  are  added:  ''Is  payable  in 
currency  or  current  funds:  or"  and  it  omits  the  last 
paragraph. 

Sec.  8.  The  Act  adds  the  following  as  additional  bub- 
section:  "7.  An  instrumeyit  payable  to  the  estate  of  a 
deceased  person  shall  be  deemed  payable  to  the  order  of 
the  administrator  or  executor  of  his  estate." 

Sec.  9.     Sub-sections  3  and  5  are  omitted  and  these 


APPENDIX  367 

substituted:  "3.  When  it  is  payable  to  the  order  of  a 
person  knotvn  by  the  drawer  or  Quaker  to  be  fictitious  or 
non-existent,  or  of  a  living  person  not  intended  to  have 
any  interest  in  it."  "5.  When,  althouqh  originally  pay- 
able to  order,  it  is  indorsed  in  blank  by  the  payee  or  a 
'subsequent  indorsee." 

Sec.  14.  The  Act  inserts  these  words,  "issued  or," 
between  the  words  "is"  and  "negotiated"  near  the  be- 
ginning of  the  last  sentence  of  this  section. 

Sec.  23.  The  Act  omits  the  words  "of  the  person  whose 
signature  it  purports  to  be"  near  the  beginning  of  the 
first  sentence. 

Sec.  25.  The  last  sentence  has  been  changed  to  read 
as  follows:  "An  antecedent  or  pre-existing  claim, 
ivhether  for  money  or  not,  constitutes  value  where  an 
instrument  is  taken  either  in  satisfaction  therefor  or  as 
security  therefor,  and  is  deemed  such,  whether  the  in- 
strument is  payable  on  demand  or  at  a  future  time." 

Sec.  29.  The  words  "ivithout  receiving  value  there- 
for" are  omitted  from  the  first  sentence;  at  the  end  of 
the  section  these  are  added,  "and  in  case  a  transfer  after 
maturity  was  intended  by  the  accommodating  party  not- 
withstanding such  holder  acquired  title  after  maturity. 
Sec.  31.  These  words  are  added:  "And  the  addition 
of  ivords  of  assignment  or  guaranty  shall  not  negative 
the  additional  effect  of  the  signature  as  an  indorsement, 
unless  otherivise  expressly  stated." 

Sec.  37.  The  Act  adds  to  Sub-section  2,  "or  except  in 
the  case  of  a  restrictive  indorsement  specified  in  Section 
$6,  Sub-section  2,  any  action  against  the  indorser  or  any 
prior  party  that  a  special  indorsee  ivould  he  entitled  to 
bring."  It  also  substitutes  for  the  words  ''/*/6'  rights  as 
such  an  indorsee"  in  Sub-section  3  the  words  "the  i)fstru- 
ment"  and  at  the  end  of  the  last  paragraph  adds  the  fol- 


368  APPENDIX 

lowing:  "Specified  in  Section  36,  Sub-section  i,  and  as 
against  the  principal  or  cestui  qui  trust  only  the  title  of 
the  first  indorsee  under  the  restrictive  indorsement  speci- 
fied in  Section  36,  Sub-sections  2  and  3,  respectively." 

Sec.  40.  The  words,  '^ payable  to  bearer,"  are  omitted 
and  these  substituted:  "originally  payable  to  or  indorsed 
specially  to  bearer." 

Sec,  49.  The  last  seven  words  of  the  first  sentence  fol- 
lowing the  word  "right"  are  omitted  and  these  substi- 
tuted, "to  enforce  the  instrument  against  one  who  signed 
for  the  accommodation  of  his  transferer,  and  the  right 
to  have  the  indorsement  of  the  transferer,  if  omitted  by 
accident  or  mistake." 

Sec.  57.  The  Act  inserts  after  the  word  "themselves" 
a  reference  to  a  statute  making  certain  defenses  real 
defenses. 

Sec.  58.  In  this  section  the  Act  inserts  the  word 
"duress"  after  "fraud"  near  the  end  of  the  section  and 
for  the  last  two  words,  "the  latter,"  substitutes  "such 
holder." 

Sec.  61.  The  Act  omits  the  word  "subsequent"  before 
"indorser"  near  the  end  of  the  first  sentence. 

Sec.  64.  Sub-sections  1  and  2  are  omitted  and  these 
substituted:  "1 — If  the  instrument  is  a  note  or  bill  pay- 
able to  the  order  of  a  third  person,  or  an  accepted  bill, 
payable  to  the  order  of  the  draiver,  he  is  liable  to  the 
payee  and  all  subsequent  parties."  "2 — //  the  instrip- 
ment  is  a  note  or  unaccepted  bill  payable  to  the  order  of 
the  maker  or  drawer,  or  is  payable  to  bearer,  he  is  liable 
to  all  parties  subsequent  to  the  maker  or  drawer." 

Sec.  66.  The  Act  inserts  after  "indorser"  at  the  be- 
ginning of  the  section  the  words,  "not  an  accommodating 
party."  It  also  inserts  "and  four"  after  the  word 
"three"  in  Sub-section  1   and  substitutes,  "every  in- 


APPENDIX  360 

dorser"  for  "he"  near  the  beginning  of  the  last  sentence 
after  the  words  "in  addition." 

Sec.  68.  The  last  sentence  of  this  section  is  omitted 
and  the  following  snl)stituted :  "All  parties  jointly  lior- 
hle  on  a  negotiable  instrument  are  deemed  to  be  jointly 
and  severally  liable." 

Sec.  69.  The  following  is  added  to  this  section: 
"Sec.  69a.  Whenever  any  bill  of  exchange  drawn  or  in- 
dorsed within  this  State  and  payable  without  this  Si  ate  >s 
duly  protested  for  non-acceptance  or  non-payment,  the 
draiver  or  indorser  thereof,  due  notice  being  given  of 
such  non-acceptance  or  non-payment,  shall  pay  such  bill 
at  the  current  rate  of  exchange  and  with  legal  interest 
from  the  time  such  bill  ought  to  have  been  paid  imtil 
paid,  together  with  the  costs  and  charges  of  protest,  and 
on  bills  payable  in  the  United  States  in  case  siiit  has  to 
be  brought  thereon  and  on  bills  payable  without  the 
United  States  with  or  without  suit,  five  per  cent  damages 
in  addition." 

Sec.  70.  The  section  adds  the  words  "except  in  the 
case  of  bank  notes"  after  the  word  "instrument"  where 
it  is  first  used  in  the  first  sentence. 

Sec.  80.  The  Act  omits  all  following  the  words,  "for 
his  accommodation. ' ' 

Sec.  87.  This  section  is  omitted  from  the  Act  in  this 
State. 

Sec.  119.  Sub-section  -i  is  omitted  from  th(^  Act  in  this 
State. 

Sec.  120.  The  Act  omits  Sub-section  3  and  Sub-section 
4  of  the  Act  is  given  as  Sub-section  3. 

Sub-section  5  then  becomes  Sub-section  4  in  this  State 
and  contains  these  additional  words:  "or  unless  the 
principal  debtor  be  an  accommodating  party." 

Sub-section  6  is  numbered  5  in  this  State  and  changed 


370  APPENDIX 

in  the  following  manner:  The  second  word  "any''  is 
changed  to  "an"  and  after  "agreement"  the  words  "in 
favor  of  the  principal  debtor"  are  inserted.  Between 
the  words  "assent"  and  "of,"  which  occur  at  about  the 
middle  of  the  sub-section,  the  words  "prior  or  subse- 
quent" are  inserted  and  at  the  end  these  words  are 
added:  "Or  unless  the  principal  debtor  be  an  accom- 
modating party." 

Sec.  124.  The  w^ords,  "fraudulently  or,"  are  inserted 
before  "materially"  where  it  first  occurs,  near  the  be- 
ginning of  the  first  sentence  and  after  the  word  "al- 
tered" which  follows  it,  the  Act  inserts  "by  the  holder." 

Sec.  134.  The  words  "to  whom  it  is  shown  and"  to- 
ward the  end  of  the  section  are  omitted. 

Sec.  135.  The  words  "or  after"  are  inserted  between 
the  words  "before"  and  "it  is." 

Sec.  137.    This  section  is  omitted  from  the  Act. 

Sec.  186.  The  Act  inserts  the  following  after  the  words 
"its  issue":  "and  notice  of  dishonor  given  to  the  drawer 
as  provided  for  in  the  case  of  bills  of  exchange." 

loWA. 

Sec.  2.  In  Sub-section  3  the  words  "or  of  interest" 
are  omitted. 

Sec.  85.  The  following  has  been  added  to  this  section : 
"A  demand  made  on  any  one  of  the  three  days  folloiving 
the  day  of  maturity  of  the  instrument,  except  on  Sundo.y 
or  a  holiday,  shall  be  as  effectual  as  though  made  on  the 
day  on  which  demand  may  be  made  under  the  provisions 
of  this  Act,  and  the  provisions  of  this  Act,  as  to  notice 
of  non-payment,  non-acceptance  and  as  to  protest  shall 
be  applicable  with  reference  to  such  demand  as  though 
the  demand  were  made  in  accordance  with  the  terms  of 
this  Act;  but  the  provisions  of  this  section  shall  not  be 


APPENDIX  371 

construed  as  authorizing  demand  on  any  day  after  the 
third  day  from  that  on  which  the  instrument  falls  due 
according  to  its  face." 

Kansas. 

Sec.  16.  The  Act  omits  the  third  sentence  of  this  sec- 
tion. 

Sec.  70.  Near  the  end  of  the  first  sentence  after  the 
word  "maturity"  the  statute  inserts  these  words,  "and 
has  funds  there  available  for  that  purpose." 

Sec.  85.  The  words  "or  becoming  payable"  are  in- 
serted near  the  beginning  of  the  third  sentence,  after  the 
words  "instruments  falling  due." 

Sec.  192.    The  last  sentence  is  omitted  from  the  Act  in 

this  State. 

Kentucky. 

Sec.  5.    The  Act  omits  Sub-section  3. 

Sec.  19.  This  section  is  omitted  and  the  following  sub- 
stituted: "19.  The  signature  of  any  party  may  be  made 
by  an  agent  duly  authorized  in  ivriting." 

Sec.  48.  The  word  "  oimer"  is  substituted  for 
"holder"  in  the  first  sentence. 

Sec.  85.  The  third  sentence  beginning  with  the  words 
"instruments  falling  due"  is  omitted. 

Sec.  95.  The  Act  substitutes  the  word  "must"  for 
''need  not"  near  the  beginning  of  the  first  sentence  and 
substitutes  "written"  for  "verbal"  at  the  end  of  that 
sentence. 

Sec.  96.  The  words  "merely  oral"  are  omitted  from 
this  section. 

Sec.  146.  The  last  sentence,  relating  to  Saturday  when 
not  a  holiday,  is  omitted. 

Sec.  196.    The  Act  omits  this  section. 


372  APPENDIX 

Maryland. 

Sec.  120.  The  Act  omits  from  Sub- section  0  the  words 
'' unless  made  ivitJi  the  assent  of  the  party  secoridarihi 
liable." 

Massachusetts. 

Sec.  85.  The  Act,  on  the  subject  of  grace,  contains  this 
provision:  "On  all  draffs  and  bills  of  exchange  made 
payable  within  this  commonwealth  at  sight,  three  days 
of  grace  shall  be  alloived,  unless  there  is  an  express  stipu- 
lation therefor  to  the  contrary."  After  the  words  "fall- 
ing due"  near  the  beginning  of  the  sentence  the  words 
"or  payable"  are  inserted,  and  the  following  provision 
is  added  at  the  end  of  the  section:  "Provided  also,  that 
the  same  shall  be  duly  presented  for  payment  or  accept- 
ance or  collection  on  the  next  succeeding  business  day." 

Minnesota. 
Sec.  87.     The  word  "not"  has  been  inserted  between 
the  word  "is"  and  "equivalent"  and  the  provision  of 
this  section  thus  completely  negatived. 

Mississippi. 

Sec.  49.  The  last  seven  words  of  the  first  sentence, 
following  the  w^ord  "right"  are  omitted  and  these  sub- 
stituted: "To  enforce  the  instrument  against  one  ivho 
signed  for  the  accommodation  of  transferer,  and  the 
right  to  have  the  indorsement  of  the  transferer  if  omitted 
by  accident  or  mistake." 

Missouri. 

Sec.  49.  In  the  first  sentence,  the  last  seven  words  fol- 
lowing the  word  "right"  are  omitted  and  these  sub- 
stituted:    "To  enforce  the  instrument  against  one  who 


APPENDIX  373 

sigtu'd  for  the  accommodation  of  his  transferer,  and 
the  rif/Jit  to  have  the  indorsement  of  the  transferer,  if 
omitted  by  accident  or  mistake." 

Sec.  62.  The  word  "then"  before  "capacity"  in  sub- 
section 2  is  omitted. 

Sec.  85.  The  words  "or  becoming  payable"  are  in- 
serted near  the  beginning  of  the  third  sentence  after  the 
words  "instruments  falling  due." 

Sec.  87.  The  foUomng  words  have  been  added  at  the 
end  of  this  section:  "But  where  the  instrument  is  made 
payable  at  a  fixed  or  determinable  future  time,  the  order 
to  the  bank  is  limited  to  the  day  of  maturity  only." 

Sec.  120.  The  Act  adds  to  Sub-section  3  the  words 
"except  when  such  discharge  is  had  in  bankruptcy  pro- 
ceedings." 

Nebraska. 

Sec.  2.  The  Act  adds  after  Sub-section  5:  "Provided 
that  nothing  herein  shall  be  construed  to  authorize  any 
court  to  include  in  any  judgment  on  am  instrum.ent  made 
in  this  state  any  sum  for  attorney's  fees  or  other  costs 
not  allowable  in  other  cases." 

Sec.  71.  All  of  this  section  after  the  words  "within 
a  reasonable  time  after  its  issue"  is  omitted  from  the 
Act. 

Sec.  75.  The  Act  omits  all  of  the  section  following  the 
words  "during   banking  hours." 

Sec.  87.  This  section  is  omitted  from  the  Act  in  this 
state. 

New  Hampshir. 

Sec.  71.  The  Act  adds  the  following  provision  defining 
a  reasonable  delay:  "Upon  a  promissory  note  payable 
on  demand,  a  demand  made  at  the  expiration  of  sixty 


374  APPENDIX 

days  from  the  date  thereof,  ivithout  grace,  or  at  any  time 
within  that  term  shall  he  deemed  to  he  made  at  a  reason- 
ahle  time;  and  any  act,  neglect  or  other  thing  which  hy 
the  provisions  of  this  Act  is  deemed  equivalent  to  a  pre- 
sentment and  demand  on  a  note  payahle  at  a  fixed  time 
or  which  would  dispense  with  such  presentment  and  de- 
mand, if  it  occurs  at  or  within  the  sixty  days  shall  he  a 
dishonor  thereof,  and  shall  authorise  the  holder  of  the 
note  to  give  notice  of  the  dishonor  to  the  indorser  as 
upon  presentment  to  the  promisor,  and  his  neglect  or 
refusal  to  pay  the  same.  No  presentment  of  the  note 
to  the  promisor  and  demand  for  payment  shall  charge 
the  indorser  unless  made  on  or  hefore  the  last  day  of  the 
sixty  days." 

Sec.  85.  The  Act  contains  this  additional  provision: 
"On  all  drafts  and  bills  of  exchange  made  payahlp  unthin 
this  commonwealth  at  sight,  three  days  of  grace  shall 
he  allowed,  unless  there  is  an  express  stipulation  there- 
for to  the  contrary."  The  words  "or  payahle"  are  in- 
serted after  the  words  "instruments  falling  due"  which 
begin  the  third  sentence. 

New  York. 

Sec.  70.  The  statute  inserts  the  words  "and  has 
funds  there  available  for  that  purpose"  near  the  end  of 
the  first  sentence  between  the  words  "maturity"  and 
"such." 

Sec.  85.  The  words  "or  becoming  payahle"  are  in- 
serted near  the  beginning  of  the  third  sentence  after  the 
words  "instruments  falling  due." 

Sec.  120.  The  act  omits  from  Sub-section  6  the  words 
"unless  made  with  the  assent  of  the  party  secondarily 
liable,  or". 


APPENDIX  375 

North  Carouna. 

Sec.  2.  In  Sub-section  3  the  words  "or  of  interest" 
are  omitted  and  the  following  is  added  at  the  end  of  the 
section:  "Nothing  in  this  chapter  shall  authorize  the 
enforcement  of  an  authorization  to  confess  judgment  or 
a  waiver  of  homestead  and  personal  property/  exemp- 
tions or  a  provision  to  pay  counsel  fees  for  collection 
incorporated  in  any  of  the  instruments  jnentioned-  in 
this  chapter:  hut  the  mention  of  ea-ch  provision  in  such 
instruments  shall  not  affect  the  other  terms  of  such  in- 
struments or  the  negotiability  thereof." 

Sec.  5.  Sub-section  2  is  atTected  and  qualified,  by  the 
change  in  Section  2  given  above. 

Sec.  16.  The  words  ''accepting  or"  in  the  second  sen- 
tence are  omitted. 

Sec.  17.    Sub-section  2  is  omitted. 

Sec.  22.  The  words  ''or  married  woman"  are  inserted 
after  the  word  "infant"  in  this  section. 

Sec.  85.  Upon  the  subject  of  days  of  grace,  the  Act 
provides  an  exception  as  follows:  "All  bills  of  exchange 
payable  within  the  state,  at  sight,  in  ivhich  there  is  an 
express  stipulation  to  that  effect,  and  not  othencise, 
shall  be  entitled  to  days  of  grace  as  the  same  are  allowed 
by  the  customs  of  merchants  in  foreign  bills  of  exchange, 
payable  at  the  expiration  of  a  certain  period  after  date 
or  sight;  provided,  that  no  days  of  grace  shall  be  allowed 
on  any  bill  of  exchange,  promissory  note  or  draft  payable 
on  demand." 

Sec.  194.    The  section  is  omitted  in  this  state. 

Ohio. 

Sec.  70.  The  Act  inserts  the  words  "and  has  funds 
there  available  for  that  purpose"  near  the  end  of  the 


376  APPENDIX 

first    sentence    between    the    words     ''maturity"    and 
"such." 

Pennsylvania. 

Sec.  137.  By  amendment  the  following  has  been  added 
to  this  section:  "Provided,  that  the  mere  retention  of 
such  bill  by  the  drawee,  unless  its  return  has  been  de- 
manded, will  not  amount  to  an  acceptance;  and  provided 
further  thai  the  provisions  of  this  section  shall  not  apply 
to  checks." 

Rhode  Island. 

Sec.  85.  The  words  "except  sight  drafts"  are  added 
after  the  words  "every  negotiable  instrument"  in  the 
first  sentence. 

Sec.  103.  In  Sub-section  2  the  last  nine  words  are 
omitted  and  these  substituted:  "ten  o'clock  in  the  even- 
ing of  the  day  folloiving". 

South  Dakota. 

Sec.  2.  The  following  provision  is  substituted  for  Sub- 
section 5.  "Provided  that  nothing  herein  contained 
shall  be  construed  to  authorize  any  court  to  include  in 
any  judgment  on  an  instrument  made  in  this  state  any 
sum  for  attorney's  fees  or  other  costs  not  now  taxable 
by  laiv." 

Sec.  14.  The  section  is  omitted  from  the  Act  and  the 
following  substituted:  ''Sec.  14.  One  who  makes  him- 
self a  party  to  an  instrument  intended  to  be  negotiable, 
but  which  is  left  ivholly  or  partly  blank,  for  the  purpose 
of  filling  afterwards,  is  liable  upon  the  instruynent  to  an 
indorser  thereof  in  due  course,  in  whatever  manner  and 
at  whatever  time  it  may  be  filled  so  long  as  it  remains 
negotiable  in  form." 

Sec.  16.    The  sentence  beginning  with  the  word  "hit" 


APPENDIX  377 

and  ending  with  the  word  ''presumed"  has  been  omitted 
and  the  following  substituted:  "An  indorsee  of  a  nego- 
tiable in^rument  in  due  course,  acquires  an  absolute 
title  thereto,  so  that  it  is  valid  in  his  hands,  notwithstand- 
ing any  provision  of  latv  making  it  generally  void  or  void- 
able, and  notwithstanding  any  defect  in  the  title  of  the 
person  from  whom  he  acquired  it." 

Sec.  42.  The  words  "the  indorsement  of"  before  the 
words  "the  bank"  near  the  end  of  the  section,  are 
omitted. 

Sec.  71.    See  under  Sec.  193  below. 

Sec.  87.     The  section  is  omitted. 

Sec.  124.  The  words  "by  the  holder"  are  inserted 
after  the  words  "materially  altered"  in  the  first  sentence 
of  this  section. 

Sec.  134.  The  words,  "to  ivhom  it  is  shoum"  are  omit- 
ted from  the  section  as  enacted  in  this  state. 

Sec.     137.     This  section  is  omitted. 

Sec.  193.  The  act  contains  the  following  additional 
sections  upon  this  subject : 

"Sec.  192 A.  The  apparent  maturity  of  a  bill  of  ex- 
change payable  on  sight,  or  on  demand,  is: 

1.  If  it  bears  interest,  one  year  after  its  date; 

or, 

2.  If  it  does  not  bear  interest,  ten  days  after  its 

date,  in  addition  to  the  time  which  ivould 
suffice,  with  ordinary  diligence,  to  forward 
it  for  acceptance. 
Sec.  192B.    The  apparent  maturity  of  a  promissory 
note,  payable  at  sight,  or  on  demand,  is: 

1.  If  it  bears  interest,  one  year  after  its  date; 

or, 

2.  If  it  does  not  bear  interest,  six  months  after  its 

date," 


378  APPENDIX 

Vermont. 

Sec.  71.  The  words  ''its  issue  in  order  to  charge  the 
Draiver"  are  substituted  for  'Uhe  last  negotiation  there- 
of" at  the  end  of  the  section. 

Sec.  118.  The  following  provision  has  been  added  to 
this  section:  "But  this  provision  shall  not  be  held  to 
dispense  with  demand  and  notice  of  dishonor  as  pro- 
vided by  sections  71  and  90." 

Virginia. 
Sec.  20.     After  the  w^ord  "capacity"  in  this  section 
the  act  inserts  the  words  "tvitliout  disclosing  his  princi- 
pal" 

Wisconsin. 
Sec.  1.  The  Act  adds  after  sub-section  5  ^^biit  no  order 
drawn  upon  or  accepted  by  the  treasurer  of  any  county^ 
toivn,  city,  village  or  school  district,  whether  drawn  by 
any  officer  thereof  or  any  other  person,  and  no  obliga- 
tion nor  instrument  made  by  any  such  corporation  or 
any  officer  thereof,  unless  expressly  authorized  by  law  to 
be  made  negotiable  shall  be,  or  shall  be  deemed  to  be, 
negotiable  according  to  the  custom  of  merchants  in 
whatever  form  they  may  be  drawn  or  made.  Warehouse 
receipts,  bills  of  lading  and  railroad  receipts  upon  the 
'Qce  of  which  the  words  'not  negotiable'  shall  not  be 
plainly  written,  printed  or  stamped,  shall  be  negotiable 
as  provided  in  Sections  1676  of  the  Wisconsin  Statutes 
of  1878,  and  in  Sections  4194  and  4425  of  these  statutes, 
as  the  sa^ne  have  been  construed  by  the  supreme  court." 
Sec.  4.  The  last  paragraph  is  omitted  and  this  sub- 
stituted: "4 — At  a  fixed  period  after  the  date  or  sight, 
though  payable  before  then  on  a  contingency.  An  instru- 
ment payable  upon  a  contingency  is  not  negotiable,  and 


APPENDIX  379 

the  happening  of  the  event  does  not  cure  the  defect  ex- 
cept as  herein  provided." 

Sec,  5.  The  Act  adds  after  the  last  word,  "illegal,'' 
these,  ''or  authorize  the  waiver  of  exemptions  from  exe- 
cution." 

See.  10.  The  Act  adds  to  this  section  ^'memoranda 
upon  the  face  or  hack  of  the  instrument,  whether  signed 
or  not,  material  to  the  contract,  if  made  at  the  time  of 
delivery,  are  part  of  the  instrument  and  parol  evidence 
is  admissible  to  show  the  circumstances  under  which  they 
were  made." 

Sec.  14.  The  Act  inserts  the  words  ''prior  to  nego- 
tiation" before  the  words  "hy  filling"  near  the  end  of 
the  first  sentence.  The  words  "a  prima  facie"  near  the 
end  of  the  second  sentence  are  omitted  and  it  reads 
*' operates  as  an  authority." 

Section  17.  An  additional  sub-section  is  added  as  fol- 
lows: "8 — Where  several  writings  are  executed  at 
about  the  same  time,  as  parts  of  the  same  transactions, 
intended  to  accomplish  the  same  object  they  may  be  con- 
strued as  one  and  the  same  instrument  as  to  all  parties 
having  notice  thereof." 

Sec.  25.  After  the  word  "debt"  in  the  second  sen- 
tence these  words  are  inserted  "discharged  extin- 
guished or  extended"  and  these  are  added  to  the  section; 
"But  the  indorsement  or  delivery  of  negotiable  paper 
as  collateral  security  for  a  pre-existing  debt,  without 
other  consideration,  and  not  in  pursuance  of  an  agree- 
ment at  the  time  of  delivery  by  the  maker,  does  not  con- 
stitute value." 

Sec.  41.  The  Act  inserts  the  word  "joint"  before  the 
word  indorsees." 

Sec.  49.  This  sentence  is  added  to  the  section  "when 
the  indorsement  was  omitted  by  mistake,  or  there  was  an 


380  APPENDIX 

agreement  to  indorse  made  at  the  time  of  the  transfer, 
the  indorsement,  when  made  relates  back  to  the  time  of 
the  transfer." 

Sec.  52.  Another  sub-section  is  added,  as  follows: 
"5 — That  he  took  it  in  the  usual  course  of  business." 

Sec.  55.  That  Act  adds  the  following  to  this  section: 
''And  the  title  of  such  person  is  absolutely  void  ivhen 
such  instrument  or  signature  was  so  procured  from  a 
person  who  did  not  knoiv  the  nature  of  the  instrument 
and  could  not  have  obtained  such  knowledge  by  the  use 
of  ordinary  care." 

Sec.  57.  The  following  is  added  to  this  section:  ^'Ex- 
cept as  provided  in  Sections  1944  and  1945  of  these  stat- 
utes, relating  to  insura^ice  premiums;  and  also  on  cases 
ivhere  the  title  of  the  person  negotiating  such  instrument 
is  void  under  the  provisions  of  Sec.  55  of  this  Act." 

Sec.  58.  In  this  section  the  Act  inserts  the  word 
''duress"  after  ''fraud"  near  the  end  of  the  section  and 
for  the  last  two  words  "the  latter"  substitutes  "such 
holder." 

Sec.  70.  All  of  the  first  sentence  after  the  words  "on 
the  instrument"  is  omitted  from  the  Act. 

Sec.  85.  The  Act  omits  the  last  sentence  beginning 
with  the  words  "instruments  falling  due." 

Sec.  117.  The  Act  adds  this  provision:  "But  this 
shall  not  be  construed  to  revive  any  liability  discharged 
by  such  omission." 

iSec.  120.  A  new  sub-section  is  added,  as  follows: 
"4a.  By  giving  up  or  applying  to  other  purposes  col- 
lateral security  applicable  to  the  debt,  or,  there  being 
in  the  holder* s  hands  or  within  his  control  the  means  of 
complete  or  partial  satisfaction,  the  same  are  applied 
to  other  purposes." 

Where  the  word  "assent"  occurs  at  about  the  middle 


APPENDIX  381 

of  Sub-section  6  the  Act  inserts,  immediately  following 
it,  the  words  ^^ prior  or  subsequent"  and  at  the  end  of 
this  sub-section  adds  '^'or  unless  he  is  fully  indemnified." 

Sec.  124.  "Where  the  word  '^assented"  occurs  near  the 
end  of  the  first  sentence  it  is  followed  by  the  words 
*' orally  or  in  ivriting"  which  the  Act  inserts  there. 

Sec.  128.  The  Act  omits  the  last  three  words  "or  in 
succession." 

See.  130.  The  words  "or  person"  which  precede  the 
words  "iiot  capacity"  are  omitted. 

Sec.  137.  The  Act  adds:  "Mere  retention  of  the  hill 
is  not  acceptance." 

Sec.  146.  The  last  sentence,  relating  to  Saturday  when 
not  a  holiday,  is  omitted. 

Sec.  183.  The  Act  contains  two  additional  sections 
here,  as  follows:  "Sec.  1682.  Whenever  any  hill  of  ex- 
change drawn  or  indorsed  within  this  State  and  payahle 
without  the  limits  of  the  United  States  shall  he  duly 
protested  for  non-acceptance  or  non-payment,  the  party 
liable  for  the  contents  of  such  hill  shall,  on  due  notice  and 
demand  thereof,  pay  the  same  at  the  current  rate  of  ex- 
change  at  the  time  of  the  demand  and  damages  at  the 
rate  of  five  per  cent  upon  the  contents  thereof,  together 
with  interest  on  the  said  contents  to  he  computed  from 
the  date  of  the  protest;  and  said  amount  of  contents, 
damages  and  interest  shall  he  in  fidl  of  all  damages, 
charges  and  expenses.  Sec.  1683.  If  any  hill  of  ex- 
change drawn  upon  any  person  or  corporation  out  of  this 
State,  hut  within  some  State  or  Territory  of  the  United 
States,  for  the  payment  of  money  shall  he  dull/  presented 
for  acceptance  or  payment  and  protested  for  non-accept- 
ance or  non-payment,  the  drawer  or  indorser  thereof,  due 
notice  heing  given  of  such  non-acceptance  or  non-pay- 
ment shall  pay  said  hill  with  legal  interest  according  to 


382  APPENDIX 

its  tenor  and  five  per  cent  damages,  together  with  costs 
and  charges  of  protest/' 

Wyoming. 

Sec.  2.  The  words  "or  of  interest"  in  sub-section  3 
are  omitted. 

Sec.  18.  The  yvoid'^ expressly"  in  the  first  sentence  is 
omitted. 

Sec.  34.  The  word  "made"  is  inserted  between  the 
words  "to  he"  and  "payable"  in  the  first  clause  of  the 
first  sentence  of  this  section. 


TABLE  OF  CASES. 


The   references 


Adam  v.  Mfr's.  Natl.  Bk 57 

Adams    v.    Wright 162 

Adams  v.  Smith 75 

Adrian  v.   M'cCaskill    92 

Aebi  V.  Bk.  of  Evansville 

142,     151,  167,  219 

Aetna    Nt.    Bk.    v.    Fourth    Nat. 

Bk 148 

Agnew  V.  Walden 68 

Agricultural  Bk.  v.  Robinson..  66 
Alabama    Coal     Mining    Co.     v. 

Brainard 49 

Albany  Tr.  Co.  v.  Frothingham.166 

Albers  v.  Hoffman 36 

Albany    Co.    v.    Ice    Co 96 

Alexander   v.    Hazelrigg 105 

Allen  V.  Suydam 231 

Allen  V.  Rightmire 81 

Alley  V.  Rogers 281 

American  Bk.  v.  Macondrey. .  .114 
Amer.  Boiler  Co.  v.  FOutham..  64 
Amer.  Nat.  Bk.  v.  Fertilizer  Co. 

■ 157,  158 

Amer.  Exchg.  Bk.  v.  Metropoli- 
tan Bk 291 

Amer.  Alkali  Co.  v.  Campbell.  .339 

Amsinck    v.    Rogers 208 

Anderson  v.  Dundee  St.  Bk 60 

Arch.  Stone  Co.  v.  St.  Louis 47 

Argus  Printing  Co.,  In  re 349 

Armstrong  v.  Pomeroy  Bk 60 

Atkins  V.  Gamble 349 

Aurora  St.  Bk.  v.  Haynes  Fames 

El.  Co 71,  92 

Auten  V.  Manistee  Nat,   Bk 290 

Auten  V.  Crahan 273 

B. 

Bailie  v.  Augusta  Savgs.  Bk 

:i81,   297 

Baker  v.  Dening 15 


are  to  pages. 

Baker  v.   Lehman 188 

Baldinger,  etc.,  Mfg.  Co.  v.  Citi- 
zens Tr.  Co 207 

Baldwin's  Bk.   v.   Smith 148 

Bambridge  v.  Louisville 149 

Bk.  of  Amer.   v.   Waydell 78,   96 

Bank    v.    Looney 51 

Bank  v.  Hale 100,  101 

Bk.    of    Commerce    v.    Farm.    & 

Merch.  Bk 71 

Bk.   of  Commerce  v.   Brayles. .  .101 

Bk.  of  Commerce  v.  Rogers 110 

Bank    v.    Miller 164 

Bank  v.  Friar 288 

Bank  v.  Union  Tr.  Co 296 

Bank  of  Virginia  v.  Craig 355 

Bankers  St.  Bk.  v.  Mason  Hand 

Lathe  Co 143 

Baring    v.    Clark 251 

Barkley  v.  Muller 74 

Barnet  v.  Young 70 

Bartlett  v.  First  Nat.  Bk 58 

Barton  Savings  Bk.  v,  Stephen- 
son   .   94 

Batcheller  v.  White 187 

Battle  Creek  Nat'l  Bk.  v.  Dean.  19 
Bayard    v.    Farmers    &    Merch. 

Bk ..356,  358,  366 

Beardsley   v.   Hill 19 

Beem  v.  Farrell 56,  58,  189 

Beer  v.  Clifton 27 

Bedford   Bk.  v.  Acoam 148 

Belch    V.    Roberts 140 

Benson   v.   Abbott 91 

Berlin    v.    Eddy 349 

Beyerque   v.    San   Francisco 20 

Bingham  v.  Kimball 64 

Bingham    v.    Reddy 186 

Black  V.  First  Nat'l  Bk.  of  West- 
minster    106 

Blake  v.  Hamilton,  etc.,  Bk 279 

Blackman    v.    Lehman,    Durr    & 
Co 16,  28,  272 


384 


TABLE  OF  CASES 


Bliss    V.    Cutter 282 

Bond  V.  Mt.  Hope  Min'g  Co 357 

Borup  V.  Mininger 291 

Boston,  etc.,  R.  R.  Co.  v.  Rich- 
ardson    362 

Boston  Steel  &  Iron  Co.  v.  Stever 

39 

Boyd  V.  Bank  of  Toledo 144 

Bracken    v.    Nicol 340 

Brailsfbrd  .V.  Williams    153 

Brainerd    v.    N.    Y..    etc.,    R.    R. 

Co 273 

Brannin    v.    Henderson 213 

Brass  v.  Worth 351 

Breese   v.    Snyder 49 

Brenneman  v.  Furniss 68 

Brewster  v.  McArdle 35 

Brewster  v.  Schrader 67 

Bright  V.  Offield 17,  23 

Brill  V.  Jefferson  Bk 155 

Brinkman  v.  Hunter 217 

Brisbane  v.  Delaw.  Riv.,  Etc.,  R. 

R-  Co 339,  361 

Broadway    Nat'l.    Bk.    v.    Heffer- 

man   187 

Brooklyn  Union  Bk.  v.   Sullivan 

b4 

Brown    v.    Butchers    &    Drovers 

Bk 15 

Brown  v.   Peoples   Sav.   Bk 290 

Brown    v.    Rowan 108 

Brown    v.    Johnson 188 

Brownell   v.   Winnie 189 

Browning  v.   Gosnell 188 

Brunnagin    v.    Tallant 2/2 

Bryant  v.  Eastman 32,  86 

Bouck    v.    Lambeck 119 

Builders  L.  &  C.  Co.  v.  Weimer 

108,     186 

Buildg.  &  Loan  Ass'n  v.  Walton 

57 

Burdette  v.  Bartlett 122 

Burgess  v.  Chapin 118 

Burgettstown  Nat.  Bk.  v.  Nill..l43 

Burns  Lbr.  Co.  v.  Doyle 224 

Burr  v.  Beckler 43 

Burson  v.  Huntington   43 

Burton    v.    McMillan 102 

Bush  V.   Brown 102 


Butchers  &  Drovers  Bk.  v.  Hub- 
bell  78 

Buzell  V.  Tobin 44 

C. 

Cabot  Bk.  v.  Warner 153 

Cagle    V.    Lane 107 

Camp    V.    Carpenter 56 

Campbell  v.  Pettingill 224 

Canajoharie  Natl.  Bk.  v.  Defen- 

dorf    104 

Cantrell    v.    Davidson 90,    260 

Caras  v.  Thalmann 265,  269 

Carlisle   v.   Hooks 224 

Carpenter   v.    Farmsworth 51 

Carter  v.  Butler 89 

Carter   v.    Long 64 

Casco  Nat'l  Bk.  v.  Clark 51 

Casker  v.  Kuhne ' 208 

Case  V.  Burt 218 

Cedar    Rapids    Nat.    Bk.    v.    Ba- 

shara   .  . 87 

Chamberlain   v.   Greenleaf 354 

Champion    v.    Gordon 205 

Champion     F'dry,     etc.,     Co.     v. 

Heskett  101 

Chelsea  Exch'g  Bk.   v.   First  U. 

P.  Ch 87 

Chemical  Nat.  Bk.  v.  City  Bank 

52 

Chemical   Nat.   Bk.   v.   Kellogg.  .   88 
Chicago  First  Nat.   Bk.  v.  Reno 

Co.    Bk    78 

Chicago  Title,  etc.,  Co.  v.  Brady 

116 

Chipman    v.    Foster 51 

Churchill   v.   Yeatman 143 

Citizens  Bk.  v.  Brown 22,  272 

Citizens  Bk.  v.  Cowles 96 

Citiz.     Bk.     V.     Crittenden    Rec. 

Press    105 

Citiz.   Bank   v.    Robbins 360 

Citiz.  Cent.  Bk.  v.  New  Amster- 
dam N.  Bk 136 

City  of  Adrian  v.  Whitney  Cntr. 

Nat.   Bk 45,  107 

City  Dep.  Bk.  v.  Green 97 

City  Bk.  V.  Lauman 222 


TABLE  OF  CASES 


385 


Clark    V.    Cook. 215 

Clark    V.    Gordon 222 

Clemens  v.  Staunton 209 

Cleveland,     etc.,     R.     R.     Co.    v. 

Robbins     361 

Closson  V.  Stearns 15 

Coaling  Co.  v.  Howard 52 

Cobb  V.   Heron 64 

Coburn  v.  Neale 56 

Coit    V.    Humbert 353 

Colt  V.  Barnard 27 

Columbian  Bkg.  Co.  v.  Bowen.. 

28,  129,  136,  276 

Columbia  Dist.  Co.  v.  Rech.187,  189 
Columbia    Finance    Co.    v.    Pur- 
cell   77 

Columbia  Knickerbocker  Tr.  Co. 

V.  Miller  136 

Columbia    Second    Nat.    Bk.    v. 

Cummings     296,  297 

Colo.  Nat.   Bk.  v.   Boettcher 224 

Commercial   Bk.  of  Pa.   v.   Arm- 
strong     298 

Commercial  Bk.  v.  Chicago,  etc., 

R.  R.  Co 284 

Commercial    Nat'l    Bk.    v.    First 

Nat.   Bk 58 

Commercial  Bk.  v.  Henninger.  ,148 
Commerical  Bk.  v.  McGuire.  . .  .187 
Commercial   Bk.   v.   Varnum.  . .  .242 
Commercial  Nat.  Bk.  v.  Zimmer- 
man     127 

Comm  V.  Dalzell 349 

Commonwealth    v.    Butterick.  . .   73 

Commonwealth  v.  Wathen 68 

Commonwealth  v.  Reffitt 102 

Comstock  V.   Buckley 106,   177 

Continental    Nat.    Bk.    v.    Heil- 

man    51 

Converse  v.   .Johnson 26 

Cook  v.  Baldwin 214 

Cook  V.   Wolfendale 224 

Corbett    v.    Fetzer 81 

Coolidge  V.  Payson 216,  217 

Corner  v.  Pratt 143 

Cornerstone  Bk.  v.  Rhodes 49 

Corwith    First    St.    Bk.    v.    Wil- 
liams        56 

Cottle  V.  Buffalo  Marine  Bk 273 


Count  V.  Thompson 159 

Cover  V.  Myers 106 

Cox   V.    N.   Y.   St.   Bk 138 

Craig    V.    Hesperia    Land,    etc., 

Co 357 

Craig  V.  Palo  Alto  Stock  Farm.  79 

Crawford  v.  Moore 178 

Creteau  v.  Foote,  etc..  Glass  Co. 

Cribbs    v.    Sowle 101 

Critten   v.   Chemical   Bk 94 

Crocker  v.  Colwell 49 

Crosby  v.  Wright 119 

Crowe  v.  Beem 187 

Crowell    V.    .Jackson 352 

Culloden  Bk.  v.  Forsyth 337 

Curren  v.  Witter 272 

Curtis  V.  Davidson 122 

Cushing  V.   Gore 278 

Cutts  V.  Perkins 36 

D. 

Dalrymple  v.    Wyker 64 

Davis    V.    Gore 30 

Dawson    v.    Wombles 63 

Debebian    v.    Gala 33 

Dennett   v.   Codman 47 

DeWitt  V.  Walton 49 

Dingman    v.    Amsinck 69 

Dodge  V.  Bank 60 

Donovan  v.  Flynn 213 

Doom   v.    Sherwin 81 

Dorsey  v.  Wolff 18 

Doubleday   v.   Kress 131 

Dove  V.  Fansler 191 

Downes  &  Co.  v.  Church 268 

Downing  v.  Neeley 92 

Dresser  v.  Mo.  R.  R.  Cons.  Co.  . .   99 

Drexler   v.    Smith 85 

Dunbar  v.  Amer.  Tel.,  etc.,  Co.  .342 
Dupont  Powder  Co.  v.  Rooney..l66 

Dykers  v.  Allen 350 

Dykers   v.   Leather  Mfrs.   Bk...278 
Dykman    v.    Northbridge 243 

E. 
E.  Birmingham  Land  Co.  v.  Den- 
nis     356 

Eastman    v.   Thurman :^30 

Eakin  v.  citizens  St.  Bk 215 


386 


TABLE  OF  CASES 


Easton  v.  Hodges 350 

Edgerton   v.   Preston 32 

Elgin  Bkg.  Co.  v.  Hall 97 

Ellicott  V.  Martin 

Elliott  V.  Cap.  City  St.  Bk 273 

Ensign  v.  Fogg 89 

Erwin  v.  Lynn 74 

Erwin    v.    Scotten 48 

Espy  V.  Bank  of  Cincinnati.  .57,  113 

Evans  v.  Gee 76 

Exchg.  Bk.  V.  Third  Nat.  Bk 

281,  285,  297 

Ex  parte  Goldberg 

F. 

Factors'  Ins.  Co.  v.  Marine  Ins. 

Co 360 

Fanshaw  v.  Peet 225 

Farmers'  Bk.  v.  Newland 283 

Farmers'   Nat.   Bk.   v.   Farmers' 

etc..  Bank 118 

Farmers'  Tr.  Co.  v.  Schenuit...   73 

Farley  Nat.  Bk.  v.  Pollock 283 

Fassin  v.  Hubbard 81 

Fawcett  v.  Nat.  Life  Ins.  Co 75 

Ferguson  v.  Davis 54 

Ferguson  v.  Netter 68 

Fillebrown   v.   Hayward 103 

Finch   V.    Karste 295 

Findlay  v.  Cowles 177 

Fink   V.   Farmers'   Bk 64 

Finley  v.  Smith 23 

Fire  Ins.  Co.  v.  Hull 102 

First  Nat.  Bk.  v.  Hix 66 

First  Nat.  Bk.  v.  Stallo 63 

First  Nat.  Bk.  of  Elgin  v.  Rus- 
sell        23 

First  Nat.  Bk.  v.  First  Nat.  Bk.   78 

First  Nat.  Bk.  v.  Fowler 84 

First  Nat.  Bk.  v.  Harris 92,  183 

First  Nat.  Bk.  v.  Home  Ins.  Co. 209 

First  Nat.  Bk.  v.  Flath 95 

First    Nat.    Bk.    of    Belmont    v. 
First  Nat.  Bk.  of  Barnesville.  .120 

First  Nat'l.  Bk.  v.  Trognitz 213 

First  Nat.   Bk.   of  Murfreesboro 
V.  First  Nat.  Bk.  of  Nashville. 213 

First  Nat.  Bk.  .v.  ClarK 213 

Ffrst   Nat.   Bk.   v.   Comm'l    Sav. 
Bk 215 


First  Nat.  Bk.  v.  Muskogee  Pipe 

L.  Co 215 

First    Nat.    Bk.    v.    Fourth    Nat. 

Bk.    (U.    S.) 291 

First  Nat.  Bk.  v.  Fourth  Nat.  Bk. 

(N.  Y.)    295 

First  Nat.  Bk.  Chicago  v.  Bk.  of 

Whittier    297 

First  Nat.  Bk.  v.  Nor'west'n  Nat. 

Bk 58 

Flagg  V.  School  Dist 17 

Fitchburg  Bk.  v.  Greenwood....  81 

Flynn  v.  Howard 191 

Foland  v.  Boyd 160 

Foley  V.  N.  Y.  Sav.  Bk 220 

Ford   V.    Angelrodt 224 

Forest  v.  Safety  Bkg.  &  Tr.  Co.  .272 

Foss  V.  Norris 131 

Foster   v.    Collner 48 

Fountain  v.  Bigham 102 

Fowler  v.  Fleming 143 

Fowler  v.  Gate  City  Nat.  Bk....214 
Fowler  Paper  Co.  v.  Jones  Sales 

Bk.  Co 131 

Franklin  Bk.  v.  Freeman 278 

Franklyn  Bk.  v.  Roberts 66 

Franklyn  Bk.  v.  Comm'l  Bk 349 

Frazer  v.  Phenix  Nat.  Bk 128 

Freeman's  Bk.  v.  Nat.  Tube  Wks. 

78 

Freese  v.  Brownell 87 

French  v.  Barney ■. 92 

Froth  V.   Thrush 158 

Fulton  V.  Loughlin 85 

•G. 

Gallo  V.  Brooklyn  Sav.  Bk 58 

Gansevobrt  v.   Williams 85 

Gardner  v.  Beacon  Tr.  Co 

102,  355,  359 

Garrard  v.  Hadden 41 

Gate  City  Nat.  Bk.  v.  Schmidt.. 303 

Gazzan  v.  Armstrong 253,  263 

Geary  v.  Physic 15 

Gemmell  v.  Davis 337,  339,  349 

Georgia  Nat.  Bk.  v.  Henderson . , 

286,  289 

German-Amer.  Bk.  v.  Milliman.136 
German  Nat.  Bk.  v.  Foreman.  . .  .148 
German  Sav.  Bk.  v.  Renshaw. .  .354 


TABLE  OF  CASES 


387 


Germania  Nat.  Bk.  v.  Mariner.. 

47,  51 

Geyser-Marion  Gold  Min'g  Co.  v. 

Stark     356 

Giesen  v.  London,  etc.,  Mfg.  Co.  .340 

Gilley  v.  Harrell 34 

Oilman   v.   Berry ., 98 

Gilpin  V.  Savage. 133 

Ginn  v.   Dolan 63 

Gleason  v.  1  uayer 79,  155 

Glidden  v.  Chamberlain. ..  .117,  144 

Goldberg,    Ex   parte 108 

Goldman  v.   Blum 74 

Goldman  v.  Goldberger 122 

Goodman    v.    Simonds 103 

Goodnow  V.  Warren 159 

Goodsell  V.  McElroy  Bros 90 

Goolrick  v.  Wallace 81 

Gordon  v.  Irvine 118 

Gould  V.  Venice ". 273 

Gray  v.  Milner 15 

Greenfield  Bk.  v.  Crafts 57 

Greenfield  Sav.  Bk.  v.  Gray 41 

Greenway  v.  Wm.  D.   Orthwine 

Grain  Co 69 

Gross  V.  Emerson 23 

Guaranty   Co.   of  N.   A.   v.   East 

Rome  Town  Site  Co 339,  349 

H. 

Racket  v.  First  Nat.  Bk.  of  Lou- 
isville    41 

Haddock  Blanchard  &  Co.  v.  Had- 
dock   116 

Haines  v.  Nance 214 

Hale  V.  Citizens  Bk 100 

Hall  V.  Grayson .  .100 

Handsacker  v.  Pedersen 188 

Harper  v.  Tiffin  Nat.  Bk 52 

Harpold  v.  Stobart 340 

Harrison   v.   Ruscoe 153 

Hartington  Bk.  v.  Breslin.. 39 

Harvesting  Mach.  Co.  v.  Blair.. 

189,  190 

Harvesting  Mach.   Co.   v.   Yank- 
ton Sav.  Bk 288 

Hatcher  v.  Chambersburg  Bk...  81 

Hatch  V.  First  Nat.  Bk 26 

Hazlett   V.    Bragdon 166 


Hazlett  V.  Connell  Bk 296 

Hefner  v.  Dawson 56 

Hewins  v.  Cargill 187 

Hibernia  Bk.  &   Tr.  Co.  v.  Dres- 
ser       22 

Hill  V.  Hall   44 

Hilsinger  v.  Georgia  R.  Bk 273 

Hilsinger  v.  Trickett 283 

Hinkley  v.  Merchants  Bk 45 

Hinsdale    v.    Miles 135,  249 

Hitchcock   V.    Buchanan 51 

Hodge    V.    Smith 42,44,101 

Hodge  V.  Wallace 17,  18,  98,  102 

Hodgens   v.    Jennings 48,  100 

Hodges  V.   Adams 75 

Hodges  V.  Iowa  Barb.  Steel  Co.. 217 
Hogan  V.  Globe  Mut.  Biug.  Assn. 

224 

Hogg  V.  Thurman 64 

Holbart   v.    Lauretson 94 

Holdsworth    v.    Hunter 267 

Holland  Tr.  Co.  v.  Waddell. 116 

Holmes   v.   Holmes 180 

Hood  V.  Robbins 77 

Holmes    v.    Trumper 41 

Hopper-Morgan  Co.,  In  re 104 

Hoppin    v.    Buff um 349 

Horan   v.   Mason 106 

Hostetter  v.  Wilson 24 

Houck  V.  Graham 188 

Houston  Bk.  v.  Day 37 

Hovorka  v.   Hemma 56 

Hudson  V.   Moon 63 

Hughes  V.  Drovers,  etc.,  Bk....356 

Hughitt  V.   Johnson 24 

Hurst  V.  Lee .101 

Hunt  V.  Stewart 86 

Huntington  v.  Shute 63 

Hutchins  v.  State  Bk 358 

I. 

Ilsley  V.  Jones 213 

Ilsley  V  Smedes 23 

Ingram   v.    Foster 220 

Iowa  St.  Bk.  V.  Claypool 38 

Ironclad  Mfg.  Co.  v.  Sackin. . .  .134 

Irving  V.  Wetherald 260 

Irwin  V.  Reeves  Pulley  Co 290 

Israel  v.  Gale 65 


388 


TABLE  OF  OASES 


J. 

Jackson  v.  Hudson 252 

Jacobus  V.  Jamestown  Mantel  Co. 

70 

James  v.  E.  G.  Lyon  Co 216 

Jarvis    v.    Wilson 112 

Jefferson  Bk.  v.  Chapman 45 

Jensen  v.  Wilself 272 

Jerman  v.  Edwards 90 

Jett  V.    Standafer 59 

Johnson  v.  Clark 217 

Johnson  v.  Laflln 337 

Johnson  v.  Schnabaum 260 

Johnson  v.  Way 104 

Jones  V.  Home  Furn.  Co 32,  49 

Jones  V.  Miners'  Bk 56 

Jordon  v.   Long 77 

Jurgens  v.   Wickman 163 

K. 
Kansas   City,    etc.,   R.   R.   Co.   v. 

Cobb     274 

Kavanagh  v.  Bk.  of  America. .  .104 

Kayton   v.   Barnett 52 

Keidan  v.  Winegar 51 

Keller  v.  Johnson 101 

Kellogg   V.    Curtis 95 

Kennedy  v.  Broderick 23 

Kerr  v.   Smith 34 

Kester  v.  Kester 177 

Kiefer   v.    Tolbert 90 

Kimbro   v.   Lytle 95 

King    V.    Griggs 158 

Kingan  &  Co.  v.  Silvers 190 

Kirby   v.   Ruegamer 51 

Kitchen   v.    Laudenback 104 

Klotz  V.  Silver 135 

Knapp  V.  Cowell 68 

Knight   V.    Braswell 26 

Knox  V.  Eden  Musee,  etc.,  Co.. 

356 

Knoxville  Bk.  &  Tr.  Co.  v.  Mer- 

shon     121i 

Kohn     V.     Consolidated     Butter, 

etc.,   Co 115 

Konig  V.  Bayard 259 

Korkemas    v.    Macksoud 178 

Krouskop    V.    Shontz 187 

Krumbhaar  v.  Griffiths 352 


L. 

Lamar   v.   Micou 355 

Lamon  v.   French 224 

Lampman  v.  Lampman 102 

Lamson   v.   Beard 107 

Land  Title  &  Tr.   Co.   v.  North- 
western Nat.   Bk 61 

Lang  V.  Smith 267 

Lankofsky    v.    Raymond 166 

Law  v.  Stewart 70 

Lawrence,   In  re 101 

Lawrence    v.    Miller 153 

Lawrence   v.   Maxwell 350 

Leask  v.  Dew 183 

Leather  Mfrs.  Bk.  v.  Morgan...   59 

Lehnhard  v.   Sedway 215 

Leitch  V.  Wells 355,  358 

Lennon  v.  Gruner 118 

Lenox  v.  Leverett 254,  263 

Leonard    v.    Draper 117,  118 

Levy   V.   Arons 186 

Lewisohn  v.  The  Kent  &  Stanley 

Co 32 

Liberty  Tr.  Co.  v.  Tilton 108 

Libby  v.   Pierce 27 

Liesemer  v.   Burg 177 

Life  Ins.  Co.  v.  Pendleton 140 

Lightner   v.   Roach 113 

Lindeman's  Bxtr.  v.  Guildin. . .  .159 

Lindsay  v.  Price 74 

Linick    v.    Nutting 42 

Linn   v.   Horton 154 

Lititz  Nat.  Bk.  v.  Siple 144 

Lombard   v.   Byrne 63 

Lord  V.  Hingham  Nat.  Bk 295 

Loring  v.  Brodie 354 

Louisville  Bkg.  Co.  v.  Asher 

286,  290 

Lovell    V.    Williams 52 

Lowell  V.   Bickford 93 

Lowell  Tr.   Co.  v.   Pratt 166 

Lowrey    v.    Comm'l    &    Farmer's 

Bk 359 

Lytle  v.  Lansing 104 

.   M. 
McBroom     v.     Treas.     Lebanon 

County 29 

McCaughey  v.  Smith 189 


TABLE  OF  CASES 


389 


McCord,  In   re 70 

McCorkle  v.  Miller 19 

McCormick  v.  Eckland (2 

McCoy  V.  Gilmore 15^ 

McCune  v.  Belt "'0 

McDonald  v.  Luckenbach 140 

McDonald  v.  Mclaughlin 30 

McHenry  v.  Nat.  Bk 60^ 

McKenzie   v.    Barrett Ill 

McKnight  v.  Parsons 96 

MIcMurray  v.  McMurray 106 

McNeil  V.  Tenth  Nat.  Bk..350,  353 
Machinists  Nat.  Bk.  v.  Field... 

342,  357 

Mackintosh  v.  Gibbs 88,  303 

Madison  v.  Cabelek 148 

Maddox    v.    Duncan 122 

Magruder   v.   Union   Bk 138 

Mallon   V.    Stevens 130 

Man  V.  Boykin 340 

Mandelbaum   v.   N.   Amer.   Mng. 

Co 342,  357 

Mankey  v.  Hoyt 208,  240 

Mnfrs.   Nat.   Bk.   v.   Continental 

Bk 78 

Mnfrs.  &  Merch.  Bk.  v.  Follett..  49 
Mutrs.  Nat.  Bk.  v.  Thompson. .  .260 

Manussier  v.  Wright 94 

Mapleton  Bk.  v.   Stanrod 339 

Marbury  v.   Ehlen 356,  360 

Marion  Nat.  Bk.  v.  Russell 94 

Markey  v.  Casey 17 

Markley  v.  Corey 81 

Marling  v.  Mommensen    148 

Marshall  Field  &  Co.  v.   Evans, 

Johnson,  Sloan  Co 348 

Martin  v.  Brown 245 

Martz  V.  St.  Nat.  Bk 90 

Mason    v.    Dousey 234 

Mason    v.    Franklin 246 

Mason  v.  Kilcourse 239,  245 

Massachusetts  Nat.  Bk.  v.  Snow 

45 

Massie  v.  Belford 21 

Matlock  V.    Scheuerman 66 

Matson    v.    Jarvis 186 

Maxwell  v.   Agnew 272 

Mayer  &  Bros.  Appeal 144 

Mechanics    &    Traders'    Bk.    v. 

Seitz 148 


Meader  v.  Dollar  Savg.  Bk 26 

Mehlinger   v.    Harriman 65 

Melton  V.  Pensacola  Bk 188 

Merch.  Nat.  Bk.  v.  Clark 51 

Merch.  Bk.  v.  Santa  Maria  Sug. 

Co 95 

Merritt  v.  Todd 27 

Mersman  v.  Werges 189 

Metallic  Specialty  Co.,  In  re 178 

Metcalfe  v.  Williams 51 

Meuer  v.  Phenix  Nat.  Bk 112 

Meyer   v.    Rosenheim 56 

Mexican  Asph.  Pav.  Co.  v.  Love.  110 

Michigan  Bk.  v.  Ely 216 

Miller   v.   Austin 22 

Miller  v.  Gardner 18 

Miller   v.    Hannibal,    etc.,'  R.    R. 

Co 47 

Miller  v.   Kyle 18 

Miller    v.    Marks 66 

Miller  v.  Norton 96 

Milwaukee  Nat.  Bk.  v.  City  Bk. 

of  Oswego    283 

Miners,    etc.,    Bk.    v.    St.    Louis 

Smelting  Co 61 

Mitchell   V.   Baring 246 

Mobley    v.    Ryan 35 

Monongahela   Nat.   Bk.   v.   First 

Nat.    Bk 296 

Montgomery  City  Bk.  v.  Albany 

City  Bk 218 

Montgomery  v.  Crossthwait 18 

Montgomery  v.  Schwald 177 

Montrose  Sav.  Bk.  v.  Claussen.  96 

Moore  v.   Rogers 146 

Moorhead    v.    Gilmore 85 

Morelahd's  Assignee  v.   Citizens 

Savings    Bk 243 

Morgan  v.  U.  S 19 

Morgantown   Bk.   v.   Hay 216 

Morris  v.  Union  Nat.  Bk 283 

Morris  Co.  Br.  Co.  v.  Austin 69 

Morrison  v.  Bailey 205 

Morrison  v.  Fishell 

Mount  Morris. Bk.  v.  Gorham...  54 

Moynahan  v.  Prentiss ..352 

Mundt  V.  Comm'l.  Nat.  Bk,  .345,  357 
A.urchison  Nat.  Bk.  v.  Dunn  Oil 

Mills    65 

Murray  v.  Third  Natl  Bk 140 


390 


TABLE  OF  CASES 


Murrell  v.  Edwards 214 

Myers  v.  Standart 222,  225 

N. 

Nance  v.  Lary 42 

Nashville  Bk.  v.   Henderson 134 

Nassano  1.  Tuolumne  Co.  Bk...   36 

Nat.   Bk.   V.  Weston 1^3 

Nat.  Bk.  of  N.  Amer.  v.  Kirby..   IS 
Nat.  Bk.  of  Commerce  v.  Amer. 

Nat.    Bk 112 

Natl.  Bk.  of  Commerce  v.  Amer. 

Ex.  Bk 283 

Nat.  Bk.  of  Commerce  v.  Merch. 

Nat.  Bk 284 

Nat.  City  Bk.  v.  Bkrs'  Tr.  Co.. . .  30 

Nat.  City  Bk.  v.  Westcott ..  59 

Nat.  Exchg.  Bk.  v.  Lester 41 

Nat.  Park  Bk.  v.  Koehler 181 

Nat.  Park  Bk.  v.  Saitta 230 

Nat.  Park  Bk.  v.  Seaboard  Bk. 

59,  120 

Nat.  St.  Bk.  V.  Weil 27 

Neal  V.  Wood 143 

Nelson  v.  First  Nat.  Bk 248 

New    Haven    Mfg.   Co.    v.    New 

Haven  Pulp  &  Board  Co 89 

Newport   v.    Smith 51 

Newton  v.  Bramlett 77 

New    York,    etc.,    Contr.    Co.    v. 

Selma  Savgs.  Bk 158,  209 

New  York,  etc.,  Co.  v.  Meyer 209 

N.  Y.  Life  Ins.  Co.  v.  Martindale 

187 

Niagara    Dist.    Bk.    v.    Fairman 

Mach.  Tool  Co 225 

Niblock   v.    Sprague 44 

Noble  v.  Beeman  S.  &  Co 70 

North     Car.     Corp.     Comm.     v. 

Merch.  &  Farmers  Bk 298 

Northampton  Nat.  Bk.  v.  Kidder  45 
Northwestern   Nat.   Bk.   v.   Kan- 
sas City  Bk.  of  Commerce 120 

Norwich  Bk.  v.  Hyde 46 

Noyes  v.  Loring 52 

Nutting  V.   Burked 28 

O. 

Oakdale  Mfg.  Co.  v.  Clarke 88 

Oakley  v.  Carr 157 


O'Brien  v.  Young 47 

Ocean  Nat.  Bk.  v.  Fant 135 

Ocean  Nat.  Bk.  v.  Williams 242 

O'Donnell   v.    Smith 214 

Ogden  v.  Raymond 52 

Ohm  V.   Yung 19 

O'Neil  V.  Walcott  Min.  Co..  .337,  357 
Oppenheimer      v.      Farmers      & 

Merch.    Bk 18 

Otis   Elevator  Co.  v.   First  Nat. 

Bk 40,  41 

Overman  v.  Hoboken  City  Bk..218 

Owen  V.  Blackburn 34 

Owen  &  Co.  v.  Storms 70 

Owsley   V.    Phillips 57 

P. 

Passmore  v.   North 35,  o6 

Patterson  First  Nat.  Bk.  v.  Nat. 

Broadway  Bk 350,  354,  355 

Patton  V.  Bk.  of  Lafayette 243 

Pauley  v.  State  Life  &  Tr.  Co... 348 

Payne   v.    Patrick 153 

Peck  V.  Providence  Gas  Co 358 

Peden  v.  Birkle 100 

Pelton  V.  San  Jacinto  Lbr.  Co..  188 

Penn.  R.  R.  Co.'s  Appeal 343 

Pensacola  Bk.  v.  Melton 188 

Peoples  Bk.  v.  Brooke 239,  245 

Peoples  and  Drovers  Bk.  v.  Craig 

80,  Z60 

Perry   v.   Bray 73 

Pettyjohn  v.  Nat.  Exchg.  Bk.57,  59 
Phillips  V.  Mercantile  Nat.  Bk..236 

Philpot's  Est.,  In  re 94 

Pierce  v.  State  Nat.  Bk 272 

Pierce   v.    Struthers 133 

Pilmer  v.  Branch  of  St.  Bk 34 

Pinkney  v.  Kanawha  Valley  Bk.295 

Pitt  v.  Little 183,  187 

Planters    Mercantile    Co.    v.    Ar- 
mour Pkg.  Co 291 

Plate  V.  Reynolds 230 

Plover  Sav.  Bk.  v.  Moodie..l29,  276 

Poess  V.  Twelfth  Ward  Bk 279 

Porter  v.  Cushman 89 

Porter    v.    Huie 70 

Porthouse   v.   Parker 209 

Prall  V.  Tilt 355 


TABLE  OF  CASES 


391 


Prather   v.    Hairgrove 260 

Pratt  V.  Boston,  etc.,  R.  R.  Co.. 362 

Pratt  V.  Mach.  Nat.  Bk 362 

Preston  v.   Dunham 21 

Proctor   V.   Cole 64 

Pullman  v.  Upton 348 

Putnam    v.    Crymes 29 

Q. 

Qulmby    v.    Varnum 92,  182,  183 

Quincy  Mut.  Fire  Ins.  Co.  v.  In- 
ternal.  Tr.    Co 86 

R. 

Ragsdale   v.    Gresham 112 

Railroad  Co.  v.  Cowell 49 

Rallo  Nat.  Bk.  v.  First  Nat.  Bk..ll2 
Randolph  Nat.  Bk.  v.  Hornblow- 

er    279 

Ray  V.  Faulkner 225 

Raymond  v.  Middleton 20 

Read  v.  Buffalo 20 

Real  Est.  Tr.  Co.  v.  Bird 339 

Reed  v.  Murphy 23 

Reed    v.    Roark 15 

Reed    v.    Spear 137,  138 

Regester's  Sons  v.  Reea 107 

Reilly  v.  McKinnon 103 

Rice  V.  Granger 66 

Richards    v.    Darst ■...   72 

Richards  v.  Day   38 

Richards    v.    Warring 20 

Richmond    v.    Irons 340 

Riddle  v.  Bk.  of  Montreal 275 

Rilbe  V.  Austin 181 

Roach   V.    Woodhall 55 

Roads   V.   Webb 20 

Robertson   v.   Crane 132 

Robinson   v.   Barnett 143 

Ross    V.    Hurd 144,  168 

Rosson    V.    Carroll 155 

Rousch  V.  Duff 220 

Royal   Cons.   Min.   Co.   v.   Royal 

Cons.   Mines  Co 340 

Ruiz  V.   Renauld 217 

Ryman   v.   Gerlach 353 

S. 

Sabine  v.  Payne 105 

Sampson   v.  Turney 155 


Sanford  v.  Cairo  City  Nat.  Bk..l87 

Saulsbury   v.   Blandy 217 

Schaefer  v.   Marsh 44 

Schimmelpennick  v.   Bayard.  ..  .251 

Schlessinger   v.    Kelly 105 

Schlessinger  v.  Lehmeier. 105 

Schmidt   v.    Pegg 20,  79 

Schmittler  v.  Simon 19 

bchofield   V.   Bayard 254 

Schwartz  v.  Barringer 214 

Schwartzman  v.  Post 178 

Schuchardt   v.    Hale 232 

Scotland  Co.  Bk.  v.  Hohn 71 

Scotland   Co.   Nat.   Bk  v.   O'Con- 

nell     41 

Second  Nat.  Bk.  v.  Bk.  of  Alma. 295 
Second  Nat.  Bk.  v.  Cummings. .  .284 

Second  Nat.  Bk.  v.  Graham 181 

Second  Nat.  Bk.  v.  Merch.  Nat. 

Bk 291,  297 

Sharp  V.  Drew 232 

Shattuck  V.  Amer.  Cement  Co. .  .350 

Shaw  V.  Shaw 26 

Shea  V.  Vahey 155 

Shelmerdine  v.  Duffy 115 

Sheridan   v.    Carpenter 191 

Shinew  v.   Bowling  Green  First 

Nat.  Bk 57 

Shipman  v.  Bk.  of  N.  Y 32 

Shipsey  v.  Bowery  Nat.  Bk 291 

Shisler  v.  Van  Dyke 57 

Shoe,  etc.,  Nat.  Bk.  v.  Wood 68 

Shreyer   v.    Hawkes 46 

Sigerson    v.    Matthews 144 

Simpson    v.    White 88 

Smith    V.    Bayer 79 

Smith  V.  Caro  &  Brown 27,  87 

Smith  V.  Ledyard 216 

Smith   V.   Marsack 110,  112 

Smith  V.  Melton 233 

Smith   V.   Nashville,   etc.,   R.   R. 

Co 347,  358 

Smith  V.  Poillon '.163 

Smith  V.  Rowland 151,  219 

Smith  V.  Smith 46 

Snyder  v.  Corn  Exchg.  Bk 32 

Soaps   V.    Eichberg 188 

So.  Boston  Iron  Co.  v.  Brown...  107 
Spangler  v.   McDaniel 171 


392 


TABLE  OF  CASES 


Spreckles  v.  Nevada  Bk 348 

Springs  v.  Hanover  Nat.  Bk. . .  .   5» 

Stanford  Cloth'g  Co.,  hi  re 104 

Steele   v.    McKinley 214 

Stanton   v.    Blossom 153 

Stapleton  v.  Louisville  Bkg.  Co.   18 

Star  Mills  v.  Bailey 63 

State  v.  First  Nat.  Bk.  of  Mont- 
rose       " 

State  v.  Hinton "75 

State  V.  Smith 348 

State   Bk.   of   Chicago   v.   First 

Nat.  Bk 5^ 

State  Bkg.  &  Tr.  Co.  v.  Taylor.. 339 
State  of  N.  Y.  Nat.  Bk.  v.  Kenne- 
dy     131 

States  V.  First  Nat.  Bk 59 

Steele  v.  McKinley 214 

Stern  v.  Empire  Tr.  Co 56 

Stewart   v.    Eden 167,181 

Stewart  v.  Firemans'  Ins.  Co... 359 
St.  Nicholas  Bk.  v.  Farmers'  Nat. 

Bk 297 

St.    Louis    &    S.    W.    Ry.    Co.    v. 

James    220 

St.  Charles  Sav.  Bk.  v.  Edwards.  108 

Stone  V.  Sargent 39 

Stoneman  v.  Py\e 18 

Stotesburg  v.  Massingale 222 

Stover  V.   Hamilton 28 

Strickland  v.  Parlln,  etc.,  Co...  101 

Sturtevant  v.  Jacques 30 

Sulzbacher  v.  Bk.  of  Charleston 

li;3,  236 

Supply  Ditch  Co.  v.  Elliott.  .343,  360 

Swear  v.   Carr 102 

Swope  V.  Ross 251 

Sylvester   v.   Downer 77 

Sylvester  v.  Staples 222 

T. 

Tabpr  v.  New  Bedford 191 

Tainter   v.   Winter 30 

Talapoosa  Co.  Bk.  v.  Wynn 68 

Tapee  v.  Farley 97 

Telegraph  Co.  v.  Davenport. ..  .362 

Terry    v.    Bissell 57,  59 

Terry   v.    Munger 47 

Tharp    v.    Jameson 186 


Third  Nat.  Bk.  v.  Lange 30 

Thompson    Houston    El    Co.    v. 

Capitol   El.   Co 91 

Thompson    v.    Perrine 274 

Tierney   v.   Ledden 348 

Tischer  v.  Merea 95 

Tisdale  Lbr.  Co.  v.  Piquet 22 

Todd  V.   State  Bk 222 

Tolman  v.  Amer.  Exchg.  Nat.  Bk. 

60 

Tombeckbe  Bk.  v.  Stratton 181 

Toole   v.    Crafts 167 

Tower  v.   Stanley 39 

Townsend   v.    Auld 164 

Traders  Nat.  Bk.  v.  Jones..  153,  154 
Traders'  Nat.  Bk.  v.  Rogers....    59 

Trego  v.  Cunningham 122 

Trust  Co.  of  Amer.  v.  Hamilton 

Bk 57,  58 

Trustees    of   the    I.    I.    Fund    v. 

Lewis     274 

Turnbull    v.    Maddox '. . .  168 

Tuttle   v.    Greenfield   First   Nat. 

Bk 51 

Tyler  v.   Hyde 177 

Tyler  v.   Walker 18 

U. 

Uhler  V.  Farm.  Nat.  Bk 143 

Union  Bk.  v.  Johnson 288 

Union  Nat.  Bk.  v.  Neill 103 

Union  Br.  Co.  v.  State  Bk 49 

Union    Tr.    Co.   v.    Preston    Nat. 

Bk 207 

U.  S.  v.  Am.  Exchg.  Nat.  Bk 120 

U.  S.  V.  White 28 

Usher  v.  Tucker 36 

Utica  Nat.  Br.  Co.,  In  re 177 

Utica  Bk.  v.  Smith 152,  153 

V. 
Valequette    v.    Clark    Bros    Coal 

Min.  Co 50 

Valk   v.   Simmons 171 

Vanarsdale  v.  Hax 89 

Vanderford     v.     Farmers',     etc., 

Nat.    Bk 176 

Van  Eaman  v.  Stanchfield 350 

Vette  V.  La  Barge 18,  19 

Visalia,  etc.,  R.  R.  Co.  v.  Hyde.  .340 


TABLE  OF  CASES 


393 


w. 

Wagner  v.   Kenner 35 

Wallace  v.  Jewell 188 

Wallace  v.   Douglas 224 

Walsh  V.  Blatchford 268 

Walton  V.  Williams 16,  73,  251 

Ward  V.  City  Tr.  Co 65 

Waring  v.    Betts 132 

Warren   v.    Scott 20 

Washington    Nat.    Bk.    v.    Reyn- 
olds     138 

Watson  V.  Wyman   149 

Watt  V.  Potter 132 

Waverly  First  Nat.  Bk.  v.   For- 
syth       18 

Weare  v.  Gove 52 

Weber  v.   Bullock 340 

Weber  v.  Orton 91 

Welch  V.  B.  C.  Taylor  Co 140 

Wells  V.  West.  Union  Tel.  Co 

, 140,  215 

Wentworth  Co.  v.  French 349 

West  River  Bk.  v.  Taylor..  154,  180 

Westberg  v.  Chicago  Lbr.  Co 

34,  218,  220 

Westinghouse    v.    German,    etc., 

Bk 353 

Weston    V.    Wiley 189 

Weyerhauser  v.  Dunn 38 

Wheeler  v.  Maillott 160 

Wheeler  v.   Webster 16,  214 

Whilden  v.  Merch,  Nat.  Bak...214 
Whitcombe  v.  Nat.  Exchg.  Bk.  .183 

White  V.   Rowland 110 

"V^Tiittle    V.    Fond    du    Lac    Nat. 

Bk 17 

Wicker  v.   Jones 186,  191 

Wilkesbarre  1st  Nat.  Bk.  v.  Bar- 

num   188 


Williams   v.    Keyes 149 

Williams  v.  Paintsville  Nat.  Bk. 

160 

Williamson,  Halsell,  Frazier  Co. 

V.    Ackerman    102 

Wilson  V.  Hendee 115 

Wilson  V.  Peck 162,  164 

Wilson  V.  Senier 142 

Wilson  V.  Carlinville  Nat.  Bk... 

290,    297 

Windsor  Cement  Co.  v.  Thomp- 
son      15 

Wisconsin   Y'rly  Meet'g,   etc.,  v. 

Babbler   23 

Wiseman  v.  Chiapella 232 

Wisner  v.  First  Nat.  Bk 220 

Wood  V.  Guaranty  Tr.  Co 260 

Wood    V.    Pugh 252,  263 

Wood's  Appeal 350,  355 

Woods  V.  Colony  Bk 58 

Woodward     v.     Griffith-Marshall 

Co 216 

Wooten  v.  Wilmington,  etc.,  R.  R. 

Co 360 

Worley    v.    Johnson 144 

Wright  V.  McCarthy 279 

X. 

Xander  v.  Comm 186 

Y. 
Yatesville   Bnkg.   Co.   v.   Fourth 

Nat.  Bk 58 

Yocum  v.   Smith 41 

Young    v.    Baker 38 

Young  V.  Exchange  Bk 142,  155 

Young  V.  Lowry 103 

Z. 
Zollner  v.  Moffitt 157,  257 


INDEX. 


Except  where  otherwise  stated,  the  references  are  to  the  Section  num- 
bers of  the  Uniform  Negotiable   Instruments  Act. 

A. 

Acceptance  (See  also  "Acceptor")—  Section 

Drawee  not  liable  on  bill  unless  and  until  he  accepts  it 127 

What  it  is  and  what  promise  it  implies 132 

Meaning  of  term 191 

When  incomplete  16.  191 

May  not  express  performance  by  any  means  other  than  the 

payment   of   money 132 

How  made    132,  133 

Must  be   signed   by  drawee 132 

Holder  entitled  to  on  face  of  instrument 133 

How  and  where  to  be  made  on  bill 133 

Must  be  in  writing 132,  133 

If  refused,  holder  may  treat  bill  as  dishonored 133 

By    separate    instrument 134 

By  separate  instrument  does  not  bind  acceptor,  when 134 

Promise  to  accept  bill,  virtual  acceptance,  when  deemed  an 

acceptance    135 

Promise  to  accept  bill  must  be  unconditional  and  in  writing. .  135 

Promise  to  accept  bill  is  implied  when 135 

Time  allowed  drawee  to  accept  bill 136 

If  not  given  within  24  hours  bill  must  be  treated  as  dishon- 
ored     136,  150 

Dates  as  of  day  of  presentation  if  given  later 136 

Drawee  deemed  to  have  accepted  bill  if  he  refuses  to  return 

the  bill  within  24  hours  or  destroys  it 137 

Bill  may  be  accepted  while  incomplete  or  unsigned 138 

Or  when  overdue 138 

Or  after  previous  refusal  to  accept 138 

Or   after   dishonor   by   non-payment 138 

Holder,  in  absence  of  any  different  agreement,  entitled  to  have 

acceptance  dated  as  of  day  of  first  presentation 138 

But  it  may  be  given  any  other  different  date 138 

When  date  may  be  inserted 13 

Certification  of  check  by  bank  is 187 

Of  bills   in   a  set 181 

General  acceptance,  what  is 139,  140 

Qualified  acceptance,  what  is 139,  141 

Conditional  acceptance,  what  is 141 

Acceptance  to  pay  at  a  particular  place,  is  general  when 140 


INDEX  395 

Section 

Acceptance  to  pay  only  at  a  particular  place  is  qualified 141 

Acceptance  to  pay  part  only  of  amount  of  bill,  is  qualified..   141 

Acceptance  which  is  qualified  as  to  time 141 

Acceptance  by  one  of  several  drawees 141,  145 

Acceptance   to    pay   upon   fulfillment   of   a    condition   therein 

stated,    is    qualified 141 

Holder  may  refuse  to  take  qualified  acceptance 142 

When  unqualified  acceptance  is  refused  he  may  treat  bill  as 

dishonored    142 

Where  qualified  acceptance  is  taken,  drawer  and  indorsers  are 

released  unless  then  assent 142 

When  drawer  and  indorsers   are  deemed  to  assent  to  quali- 
fied acceptance    142 

Acceptance  by  Banks   (See  introduction  to  Title  II)  — 
Acceptance,  Presentment  for  (See  Presentment  for  Acceptance)  — 

Acceptance  for  Honor 161-170 

When  may  be  made 161 

By  whom   may   be   made 161,  162 

For  whose  honor  may  be   made 161 

May  be  made  for  more  than  one  party 161 

May  be  made  for  whole  bill  or  part  only 161 

May  be  more  than  one  acceptance  for  honor 161 

Can  only  be  made  after  protest 161 

How  made,  and  by  whom 161,  162 

Must  be   in  writing 162 

Must  be  signed  by  acceptor  for  honor 162 

Is  deemed  to  be  made  for  honor  of  drawer  unless  it  expressly 

states  for  whose  honor  it  is  made 163 

When  bill  payable  after  sight  matures  if  accepted  for  honor.  166 

Protest  of  bill  accepted  for  honor 167 

Liability  of  acceptor  for  honor 164,  165 

Agreement  of  acceptance  for  honor. 164,  165 

Delay  in  making  presentment  to  acceptor  for  honor  excused, 

when    169 

Protest  upon  failure  or  refusal  of  acceptor  for  honor  to  pay..   170 

Acceptor  for  honor  discharged,   when 165 

How  presentment  for  payment  must  be  made  to  acceptor  for 

honor  and  when 168 

Bill  must  be  protested  upon  dishonor  by  acceptor  for  honor..   170 
Acceptor,  Admissions  of  and  promise  implied  from  acceptance..     62 

Liability  of   62 

Admits   that   drawer   exists   and   has   capacity   and   authority 

to    draw    the    instrument 62 

Admits  that  payee  exists  and  has  capacity  and  authority  to 

indorse   the    instrument 62 

Cannot    afterward    deny    the    things    which    his    acceptance 

admits    62 


396  INDEX 

Section 
Engages  to  pay  the  instrument  according  to  the  tenor  of  his 

acceptance   62 

Liable  to  holder  in  due  course  for  amount  of  his  acceptance 

even  though  amount  of  bill  raised 62 

Bank   certifying  raised  check   is  liable   for  amount   certified, 

when    62 

Presentment  for  payment  not  necessary  to  charge  acceptor. . .     70 
Not  released  from  liability  by  holder's  failure  to  present  in- 
strument for  payment 70 

Is  a  primary  party "^0 

(See  also  Acceptance,  Drawee) — 

Accomodation  Indorser  (See  also  "Irregular  Indorser")  — 

Liability    of    29 

Accommodation  Instrument — 

Discharged  when  paid  by  party  accommodated 119 

May  not  be  re-issued  when  paid  by  accommodated  party 121 

Liability  of  accommodation  party 29 

Accommodation  party  deemed  such  even  though  he  is  paid  for 

use  of  his  name 29 

Accommodation  party  is  liable  only  to  holder  for  value 29 

And  is  liable  to  him  notwithstanding  at  the  time  of  taking  the 
instrument  he  knew  him  to  be  only  an  accommodation  party.     29 
Action  (See  Indorser)  — 

Meaning   of   term 191 

Includes  counterclaim  and  setoff 191 

Holder  may  bring  in  his  own  name 51 

Holder  may  proceed  by,  against  secondary  parties  immediately 

upon  dishonor  of  instrument 84,  151 

Addition  of  parties  or  words — 

Is  material  alteration,  when 124 

Administrator  or  Executor — 

Signature  by    20,  44 

Presentment  to 76,  145 

Notice    to    98 

Admissions    implied    from     signatures    of    parties,     (See    "War- 
ranty")      60,  61,  62 

Agent — 

Signature   by    19 

Authority  of,  when  implied 19 

Ratification  of  signature  by  principal 19,  23 

Authority  need  not  be  in  writing 19 

When   principal's    failure    to   repudiate    agent's    unauthorized 

act  may  be  deemed  a  ratification . . . , 19 

Liability  of  persons  signing  by  agent 20 

Not  exempted  from  personal  liability,  when 20,  69 

Liability  of  agent  when  principal's  name  not  disclosed 20,  69 

Effect  of  signataure  "by  procuration" 21 


INDEX  397 

Section 
Agent  signing  "by  procuration"  must  have  written  authority 

from  principal   21 

And  must  act  within  the  actual  limits  of  his  authority  or  prin- 
cipal  not    bound 21 

A  signature  "by  procuration"  is  notice  to  everybody  that  agent 

has  only  limited  authority 21 

Indorsement,   by    ^^ 

Indorsement  by,  unauthorized    (See  Forgery). 

Liability  of,  when  instrument  is  negotiated  by  agent  without 

authority  or  "for  collection" 36,  37 

Notice  of  dishonor  by  (See  Notice  of  Dishonor). 

Alteration   of    Instrument 124,  125 

Effect    of    material 124 

Effect  of  material  upon  rights  of  holder  in  due  course 124 

Effect  of  alteration  by  stranger,   spoliation 125 

What   alterations    are   material 125 

Physical  alterations  in  instrument  itself  are  meant 125 

Fraudulent  intent  presumed,  when 125 

Payment  made  by  mistake  on  altered  instrument  may  be  re- 
covered        125 

Alternative  Drawees,  bill  may  not  be  drawn  upon  one  or  another.  128 

Alternative  Payees,  Instrument  may  be  so  payable 8 

Ambiguous  Instrument,  how  construed 17 

Amount,   certainty   as   to 1.  2 

When  there  is  discrepancy  between  words  and  figures,  words 

control    17 

Antecedent  Debt,  constitutes  value 25 

What  is    25 

Antedated   or   Post-Dated   Instrument,   is  not,   for  that   reason   in- 
valid         12 

Of  what  date  holder  acquires  title 12 

Time  of  maturity  not  postponed 12 

May  be  negotiated  at  any  time  after  its  delivery 12 

Assignment,  bill  is  not,  of  itself,  an  assignment  of  drawer's  funds.  127 
Check  is  not,  of  itself,  an  assignment  of  drawer's  funds.  .  .  .127,  189 

Assumed  Name,  Liability  of  person  signing  in 18 

Attorney's  Fee — 

Negotiable  instrument  may  contain  provision  for  payment  of.       2 
Such  a  provision  enforceable  unless,  by  other  laws,  it  is  made 

illegal    2 

In  that  event  it  does  not  effect  negotiable  character  of  instru- 
ment           2 

B. 

Bank,  acceptance  by,   (See  Introduction  to  Title  III)  — 

Meaning  of   191 

Banking  hours,  what  are 75 


398  INDEX 

Section 

Indorsement  to  or  by  "for  collection" 36 

Warranty  by,  under  indorsement  "for  collection" 66 

Certifying  check  is  liable  for  amount  certified 62 

Is  liable,  though  check  has  been  raised 62 

Making  instrument  payable  at,  is  equivalent  to  an  order  on 

bank  to  pay  it 87 

Duty  of  bank  to  pay  such  an  instrument  and  liability  for  fail- 
ure         87 

Presentment  of  instrument  payable  at 75 

When  deposit  constitutes  bank  holder  for  value 52 

Presentment  of  instrument  payable  at  branch  bank 75 

Time  when  instrument  so  payable  must  be  presented 75 

Certification  of  check  is  equivalent  to  an  acceptance  by 187 

Not  liable  on  check  unless  it  accepts  or  certifies  it 189 

Certification  of  check  by,  operates  as  assignment  of  drawer's 

funds,  (See  Checks:    Collection  of  Checks) 189 

Bankers'  Bills   (See  Introduction  to  Title  II) — 

Banking  hours,  what  are "75 

Bankrupt  or  Insolvent  presentment  to 72 

For  acceptance    145 

Notice  of  dishonor  to 101 

Bearer,  meaning  of • 191 

Instrument  is  payable  to,  when 9 

Negotiation  of  instrument  payable  to 30 

Effect  of  special  indorsement  of  instrument,  payable  to 40 

Instrument   originally   payable   to   order   becomes   payable   to 

bearer  by  blank  indorsement,  when 34 

Instrument  originally  payable  to,  may  be  transferred  by  deliv- 
ery even  though  specially  indorsed 40 

Better  Security,  bill  may  be  protested  for,  when 158 

Bill,    meaning    of 127,  191 

Bill  of  Exchange,  defined,   (Historical  reference  to  early  use  will 

be  found  in  the  Introduction  to  Title  I) 126 

"Bill"  in  act,  means  bill  of  exchange 127,  191 

Commonly  known   as   "draft" 1.  126 

Ambiguous  instrument  may  be  treated  as  bill  or  note 17 

Bill  payable  to  drawer's  own  order  may  be  treated  as  a  promis- 
sory note   ISO 

Inland  bill  defined 129 

Foreign   bill    defined 129 

Is  not,  of  itself,  an  assignment  of  drawer's  funds 127 

Protest  of  (See  Protest). 

When  may  be  treated  as  promissory  note 17,  130 

General  Provisions  as  to  form  and  interpretation 126-131 

General  provisions  as  to  acceptance 132-142 

General  provisions  as  to  presentment  for  acceptance 143-151 

General  provisions  as  to  protest 152-160 


INDEX  399 

Section 

Bills  in  a  set,  what  are ^'^^ 

Constitute    one    bill ^'^^ 

Rights  of  holders  when  different  parts  negotiated 179 

Effect  of  discharge  of  one  part  of  set 183 

Payment  of  one  part  of  set 182,  183 

Liability   of   acceptor   who   pays    one   part   without   requiring 

surrender  of  part  bearing  his   acceptance 182 

Acceptance  must  be  written  on  one  part  only 181 

Liability  of  acceptor  if  more  than  one  part  accepted 181 

Liability  of  holder  who  indorses  two  or  more  parts 180 

Rights  of  holders  where  different  parts  are  negotiated 179 

Discharge  by  material  alteration  of  one  part 183 

Bills  of  Lading  (See  Quasi-Negotiable  Instruments). 

Blanks,  what  may  be  filled  in  and  by  whom 13,  14 

When  true  date  may  be  inserted 13 

Instrument  is  avoided  if  holder  inserts  wrong  date 13 

Effect  of  insertion  of  wrong  date  if  instrument  is  in  hands 

of  a  holder  in  due  course 13 

Blank  paper,  signed,  may  be  converted  into  a  negotiable  in- 
strument, when   1^ 

But  it  must  be  done  strictly  in  accordance  with  the  authority 

given  by  party  making  the  signature 14 

And  within  a  reasonable  time 14 

Rights  of  holder  in  due  course  in  such  case  if  authority  not 

properly  exercised    1^ 

Omissions  may  be  supplied 6 

(See  Alteration;  Incomplete  Instrument;  Omissions)  — 

Blank  Indorsement  (See  Indorsement) — 

Bonds,   are   negotiable 6.  184 

Interest  coupons  of,  are  negotiable 6 

Persons  negotiating  bonds  of  public  or  private  corporations,  by 
delivery,  do  not  warrant  certain  things 65 

Broker,  liability  of,  negotiating  instrument,  (See  Agent) 69 

Business    Day,    what    is 194 

Instrument  must  be  presented  on,  at  reasonable  hour 72 

Business  Hours,  what  are,  at  bank 75 

C. 

Cancellation,  as  discharge  of  instrument 119 

Must  be  by  holder  in  his  own  right 119 

Of  signature,  effect  of 120 

Unintential,   is   inoperative 123 

By  mistake  is  inoperative 123 

Without  authority  is  inoperative 123 

Capacity — 

To  indorse,  admissions  as  to  by  maker 60 

By  drawer  ^^ 


400  INDEX 

Section 
By  acceptor    62 

Warranty  as  to  (See  Warranty). 

"Cash"  instrument  drawn  payable  to,  is  payable  to  bearer 9 

Cashier — 

How  instrument  payable  to  may  be  negotiated 42 

Instrument   payable   to,    is    deemed,    prima   facie,    payable    to 

bank  or  corporation  of  which  he  is  officer 42 

Certainty — 

As  to  sum,  what  constitutes 2 

Drawee  must  be  named  or  described  with 1 

Certificate  of  Deposit,  as  negotiable  instruments 184 

Certification  (See  Check) — 

Check  (A  statement  of  the  law  of  collection  of  checks,  etc.,  and 
of  the  principal  duties  of  banks  and  collecting  agents  will  be 

found  at    280-299 

Is  subject  to  all  provisions  of  this  Act  applicable  to  bills  of 

exchange  payable  on  demand 185 

Exchange  of  checks  as  consideration 25 

Within  what  time  must  be  presented  for  payment 186 

Effect  of  unreasonable  delay  to  present  for  payment 186 

Upon  its  dishonor,  like  proceedings  must  be  had  as  upon  a  '^'°" 

bill  of  exchange 185 

Certification  of,  is  equivalent  to  acceptance 187 

Effect  of  certification  procured  by  holder 188 

Bank  is  not  liable  upon,  until  it  accepts  or  certifies 189 

Does   not,   of   itself,    operate    as    assignment   of   any   part    of 

drawer's   funds    189 

Certification  of  check  does  so  operate 189 

Liability  of  bank  upon  certification  or  payment  of  forged  or 

raised  check    23,  62 

Collateral  Securities — ■ 

Negotiable  instrument  may  contain  provision  for  sale  of .  .  .  .       5 
Holder  making  presentment  for  payment  must  be  prepared  to 

deliver  up    74 

Collection — ■ 

Provision    in    instrument   for   costs   of,   does   not    render    sum 

uncertain    2 

Indorsement  of  instrument  for,   by   restrictive   indorsement..     36 
Collection  of  Checks,  etc.,  a  statement  of  the  law  of  collections 
and  duties  of  banks  and  collecting  agents  will  be  found  at.. 280-299 

Complete,  holder  may,  by  filling  up  blanks  in  instrument 14 

When  contract  on  instrument  is  deemed  not 16 

When  instrument  is  complete  and  regular 52 

Conditional  Acceptance    (See  Qualified  Acceptance)  — 

Conditional  Indorsement,   may  be   made 39 

But  may  be  disregarded  by  party  required  to  pay  instrument.     39 
Holder  takes  instrument,  or  its  proceeds,  subject  to  rights  of 
person  making  39 


INDEX  401 

Section 
Confession  of  Judgment,  negotiable  instrument  may  contain  provi- 
sion  authorizing    5 

Conflict  in  terms  of  instrument  or  discrepancy  between  words  and 

figures,  rule  as  to 17 

Consideration,  generally   24-29 

What  is   24,  25 

Presumption  as  to 24 

What   constitutes    25 

Exchange  of  checks  as 25 

When  absence  or  failure  of  is  a  defense 28 

Partial  failure  is  a  defense  "pro  tanto" 28 

What  consideration  sufficient  to  support  instrument 25 

When  lien  constitutes  value 27 

Antecedent  debt  as  value 25 

(See  Value). 

Contingency,  instrument  payable  on  is  not  negotiable 4 

Even  if  contingency  does  happen 4 

Corporation,  included  in  designation  "person" 191 

Officer  of,  how  instrument  payable  to  may  be  negotiated 22 

Fiscal  officer  of,  as  payee,  how  instrument  negotiable  by  and 

to  whom  payable 42 

Warranties  implied  by  negotiation  not  applicable  to  bonds  of.  65 
Countermand  of  Payment  by  drawer  dispenses  with  notice  to  him 

of  dishonor  of  instrument 137 

Withdrawal  of  funds  as 137 

Current  Money  or  Funds  negotiable  instrument  may  designate  kind 

in  which  it  is  payable 6 

Custom,  and  usage  of  business  or  trade  to  be  regarded  in  determin- 
ing what  is  or  is  not  a  reasonable  time 193 

And  usage  of  business  as  affecting  interpretation  of  language 

of  instrument  , 60 

Custom  of  Merchants  (See  Law  Merchant)  — 

D. 

Date,  omission  of  does  not  affect  negotiability 6 

Omission  of  may  be  supplied 13 

Of  instrument  is  prima  facie  true  date 11 

Instrument  may  be  antedated  or  post-dated 12 

True  date  may  be  inserted , 13 

Effect  of  insertion  of  wrong  date 13 

Of  instrument,  presumption  as  to 11 

Of  indorsement,  presumption  as  to 45 

If  antedated  or  post-dated,  person  to  whom  instrument  is  de- 
livered acquires  title  as  of  date  of  delivery 12 

From  which  interest  is  calculated  if  not  specified  in  instru- 
ment      17 

Alteration   of    125 


402  INDEX 

Section 

Days  of  Grace,  there  are  none,   (exceptions  in  certain  states) 85 

Death  of  Party,  effect  on  presentment  and  notice  of 

dishonor    76,  98,  145,  148 

Defect,  what  is,  in  title  of  person  negotiating  instrument 55 

What  constitutes  notice  of 56 

Defenses,  wlien  instrument  subject  to  original 58 

In  hands  of  transferee  without  indorsement 49 

Not  available  against  holder  in  due  course 58 

Or  one  who  derives  title  through  a  holder  in  due  course 59 

(See  Equities). 

Definitions,  of  terms  used  in  the  Act 191 

Delay  in  presentment  for  payment,  when  excused 81 

When  cause  of  is  removed,  presentment  must  be  made 81 

In  giving  notice  of  dishonor;   how  excused 113 

In  presenting  check  releases  drawer,  to  what  extent 186 

Effect  of  delay  for  an  unreasonable  time  to  present  bill  for 

acceptance     144 

For  unreasonable  time  to  demand  payment  of  instrument  pay- 
able on  demand,  effect  of .7,  53,  71,  193 

Delivery,  meaning  of 191 

Necessary  to  complete  every  contract  upon  a  negotiable  in- 
strument         16 

When  effectual  and  -when   presumed 16 

Every  instrument  incomplete  and  revocable  without 16 

Effect  of  negotiation   of   instrument   incomplete   for  want   of 

delivery    15 

Valid  delivery  conclusively  presumed,  when  and  as  to  whom.,     16 

Is   presumed,    when 16 

When  conditional  delivery  may  be  shown 16 

Is  necessary  to  complete  negotiation  of  instrument  payable  to 

order    30 

Instrument  payable  to  bearer  is  negotiable  by 30 

Instrument   payable   to   bearer  which   has   been   specially   in- 
dorsed may,  nevertheless,  be  negotiated  by 40 

Warranty  of  person  negotiating  instrument  by 65 

Instrument  payable  to  order  may  be  negotiated  by,  when 34 

Of  bill  for  acceptance 137 

Effect  of  its  destruction  by  drawee 137 

Or  of  his  refusal  to  return  it 137 

Holder  must  call  for  it  and  demand  its  acceptance  or  return. .  137 
Acceptance  not  complete  without  delivery  or  notification.  .16,  191 

Of  instrument  upon  payment 74 

Of  instrument  without  indorsement,  effect  of 49 

Demand,  when   instrument   payable   on 1,  7 

When  instrument  payable  on,  is  negotiated  an  unreasonable 

length  of  time  after  issue,  effect 53 

Effect  on  such  an  instrument  of  unreasonable  delay. .  .7,  53,  71,  193 


INDEX  403 

Section 
When   presentment  and   demand   for  payment   of  instrument 
payable  on  demand  must  be  made 71 

Destruction  of  Bill,   intentional,  when  considered  acceptance....   137 
Protest  of  lost  or  destroyed  bill 160 

lieterminable  Future  Time,  instrument  may  be  payable  at 1 

What  is    4 

Diligence  required  in  making  presentment  for  acceptance 144 

Required  in  making  demand  for  payment  of  instrument  pay- 
able on  demand 7,  53,  71,  193 

Discharge  of  Instrument  and  Parties 119-125 

By  payment,  by  principal  debtor 119 

By  payment  by  party  accommodated 119 

By  cancellation  of  instrument  by  the  holder 119 

By  any  act  which  will  discharge  a  simple  contract  for  pay- 
ment of  money 119 

When  principal  debtor  becomes  owner  after  maturity 119 

By  material   alteration 124 

By  renunciation  by  holder 122 

Of  party  secondarily  liable 120 

By  discharge  of  the  instrument 120 

By  intentional  cancellation  of  his  signature 120 

By  discharge  of  a  prior  party 120 

By  tender  of  payment  made  by  prior  party 120 

By  release  of  principal  debtor 120 

,  By  agreement  to  extend  time  of  payment 120 

Rights  of  party  who  discharges  instrument 121 

Right  to  re-negotiate  instrument 121 

Unintentional  cancellation,  or  one  made  by  mistake,  or  without 

authority,    does   not 123 

Party  claiming  mistake  has  burden  of  proof 123 

Instrument  is  discharged  by  material  alteration  unless  made 
with  assent  of  all  parties,  except  as  against  those  making, 

authorizing  or  assenting,  See  "Alteration" 124 

Of  one  of  a  set  of  bills,  (See  also  Drawer,  Indorser) 183 

Dishonor  of  Instrument  (See  also  Notice  of  Dishonor,  Protest) — 

By  non-payment    83 

Liability  of  parties  secondarily  liable  upon 84 

Engagement  of  drawer  upon 61 

Rights  of  holder  upon 84 

Effect  of  dishonor  by  non-payment 84 

Protest  upon  (See  Protest). 

Acceptance   after   dishonor 138 

By  non-acceptance   149 

Duty  of  holder  upon 150 

Rights  of  holder  upon 151 

Presentment  for  payment  unnecessary,  when 15t 

(See  also  Protest,  Payment  for  Honor,  Acceptance  for  Honor) 


404  INDEX 

Section 

Drawee,   meaning   of ^ 

Must  be  named,  or  described  with  reasonable  certainty 1 

Instrument  may  be  payable  to 8 

May  be   payee ° 

Not  liable  on  bill  unless  he  accepts 127,  189 


128 

But  not  in  alternative 12S 


May  be  two  or  more. 


Or    in    succession. 


128 


Admissions  by,  upon  acceptance 62 

And  drawer  same  person 130 

Bill  may  then  be  treated  as  a  promissory  note 130 

When  is   fictitious  person   or  person  not  having  capacity   to 

contract,  holder  may  treat  bill  as.  promissory  note 130 

What  time  allowed  to  accept 136 

Refusal  to  surrender  or  destruction  of  bill  by,  is  considered 

an  acceptance    137 

Mere  retention  of  bill  by,  unaccompanied  by  refusal  to  sur- 
render, is  not  an  acceptance 137 

Acceptance   by,   how   made 132 

Must    sign    acceptance 132 

Acceptance  by  one  or  more,  effect  of 141 

(See  also  Acceptance,  Acceptor). 
Drawer — 

Bill  may  be  payable  to 8 

What  signature  of  admits 61 

Liability  of   61 

May  limit  his  liability  to  holder 61 

Entitled  to  notice  of  dishonor,  when 89 

When  not  entitled  to  notice  of  dishonor 114 

When  notice  of  dishonor  to  is  dispensed  with 112 

Bill   may   be   treated   as   promissory   note   when   drawer   and 

drawee  are  same  person 130 

Or  when  drawee  is  fictitious  person,  or  one  not  having  capac- 
ity to  contract 130 

Existence  of  and  authority  of  to  draw  admitted  by  acceptance.     62 

When  presentment  for  acceptance  is  necessary  to  charge 143 

When  failure  to  present  for  acceptance  releases 144 

When  failure  to  negotiate  bill  within  a  reasonable  time  dis- 
charges   144,  and  see  7,  53,  71,  193 

When  presentment  for  payment  is  necessary  to  charge 70 

When  presentment  for  payment  is  not  necessary  to  charge. ...     79 

Time  when  liability  of,  accrues 84,  151 

When  notice  of  dishonor  required  to  charge 89,  150 

When  not   112,  114 

Liability  upon  dishonor  by  non-acceptance 151 

When  protest  necessary  to  charge 152 

When  failure  to  present  check  discharges 186 


TNDEX  405 

Section 

To  what  extent 186 

Discharged  when  holder  procures  certification  of  check 188 

Due  Course,  meaning  of 53 

(See  Holder  in  Due  Course). 

Due  Diligence  (See  Diligence)  — 

Duress,  what  is 55 

Effect  on  title  when  instrument  or  signature  obtained  by. . . .     55 

E. 

Election,   effect  of  provision  In  bill  giving  holder 5 

Right  to  treat  instrument  as  either  bill  or  note 17,  130 

Equities,  when  instrument  subject  to 58 

What  constitutes  notice  of 56 

Rights  of  holder  when  part  of  consideration  paid  before  no- 
tice   of    54 

(See  Defenses). 

Exchange,   meaning   of 2 

Instrument  may  contain  provision  for  payment  of 2 

Bill  may  prescribe  rate  of 2 

Executor  or  Administrator,  signature  by 20,  44 

Presentment  and  notice  to 76,  98,  145,  148 

Exhibition  of  Instrument,  instrument  must  be  exhibited  when  pay- 
ment   is    demanded 74 

And  upon  payment,  must  be  delivered  up 74 

Extension  of  Time,  effect  of  granting,  as  release  of  secondary  par- 
ties        120 

(See  Discharge  of  Instrument  and  Parties). 

F. 

Facts,  nature  of  instrument,  and  trade  usages  and  customs  to  be 

regarded  in  determining  reasonable  or  unreasonable  time 193 

Failure  of  Consideration  (See  Consideration) — 

Fear,  instrument  or  signature  obtained  by,  effect  on  title 55 

Fictitious  Person,  who  is 82,  130 

Instrument  knowingly  made  payable  to  is  payable  to  bearer..       9 

Assumed  or  trade  name  is  not  name  of 18 

When  drawee  is,  bill  may  be  treated  as  a  promissory  note...   130 

Presentment  dispensed  with  when  drawee  is 82 

Notice  of  dishonor  need  not  be  given  drawer  when  drawee  is.   114 
Notice  of   dishonor  need  not  be   given  indorser   if  aware   of 

fictitious  character  of  drawee 115 

Figures,  words   in   instrument   govern   when   there   is   conflict   or 

ambiguity    17 

Fiscal   Officer,   of   bank   or   corporation,    how    instrument   may   be 

negotiated  or  indorsed  by 42 

Force,  instrument  or  signature  obtained  by,  effect  on  title 55 

Foreign  Bill,  what  is 129 


406  INDEX 

Section 
Must    be    protested 118,  152 

Forgery  of  Signature,  effect  of 23 

Warranties  as  to,  by  parties  who  negotiate  instrument 65,  66 

Fraud,   wliat   is 55 

When  presumed   55,  125 

Instrument  or  signature  obtained  by,  effect  upon  title 55 

Form  and  Interpretation  of  Negotiable  Instruments 1-23 

G. 

General   Indorser,    liability   of 66,  67,  68 

(See  Indorser). 
Genuineness,    of   instrument,    warranty    of,    where   negotiated    by 
delivery  or   qualified   indorsement 65 

Warranty  as  to,  by  general  indorser 66 

Of  signature  of  drawer,  acceptor  admits 62 

(See  Warranty). 
Grace,  days  of,  none  allowed 85 

H. 

Holder,  meaning  of 191 

Rights  of,  in  general 51-59 

Payment  to,  discharges  instrument 51,  119 

Cancellation  of  instrument  by 119 

Unintentional  cancellation  by,  is  inoperative ,....   123 

May  sue  in  his  own  name 51 

Even  though  instrument  does  not  belong  to  him 51 

Effect  of  release  of  principal  debtor  by 120 

May  renounce  his  rights  when  and  effect  of 122 

Alteration  of  instrument  by 124 

May  fill  up  and  convert  signed  blank  piece  of  paper  into  a 

negotiable  instrument  14 

May  fill  up  blanks  in  instrument 14 

May  insert  true  date  in  instrument  or  acceptance 13 

Effect  of  insertion  of  wrong  date  by 13 

When  incomplete  instrument  not  valid  contract  in  hands  of . .     15 

When  instrument  subject  to  equities  in  hands  of 58 

Every  holder  deemed,  prima  facie,  a  holder  in  due  course....     59 

Rights  of,  upon  dishonor  by  non-payment 84 

Rights  of  upon  dishonor  by  non-acceptance 151 

Duty  of  demand  payment  within  reasonable  time,  of  certain 

instruments    53,  71 

Effect  of  refusal  by,  to  accept  payment  "supra  protest" 176 

Holder   for  Value,   who  is 26,  27 

To  extent  of  lien  held 27 

(See  Value). 

Holder  in  Due   Course,   who   is 52,  59 

Payee  as    59 

When  holder  not,  of  instrument  payable  on  demand 53 


INDEX  407 

Section 

When  for  only  part  of  amount  of  consideration  paid 54 

How  determined  when  instrument  transferred  without  indorse- 
ment      ^^ 

When  title   of  transferrer  defective 55 

What  constitutes  notice  of  defect 56 

Title  of,  and  right  to  enforce  instrument 57 

Rights  of  one  not  such  a  holder  but  who  claims  under  a 58 

Every  holder  deemed,  prima  facie,  to  be 59 

How  proved  when  it  is  shown  that  title  of  any  prior  holder 

was  defective  59 

Person  who  became  party  and  was  bound  prior  to  defect  in 

title  cannot  take  advantage  of  it  against 59 

Warranties  of  parties  in  favor  of 65,  66 

Rights  of,  on  altered  instrument 124 

Rights  of,  on  instrument  filled  up  or  negotiated  without  au- 
thority    14 

When  delivery  presumed  as  to 16 

Holder  of  Office,  how  must  be  described  when  named  as  payee..  8 
How  instrument  negotiated  or  indorsed  when  payee  is  cashier 

or  fiscal  officer  of  a  bank  or  corporation 42 

Holiday,  maturity  of  instrument  falling  due  on 85 

Wlien  day  on  which  act  is  required  to  be  done  is,  when  must 

be   done    194 

Honor,   (See  Acceptance  for  Honor,  Payment  for  Honor,  Referee 

in  Case  of  Need). 

I. 

"I" — when  construed  as  "we" 17 

Illegal   Stipulation,   not  validated   by   section   affecting   additional 

provisions  in  instrument 5 

Illegality,  of  consideration,  how  affects  title  of  person  negotiating 

instrument   55 

Effect  on  title  of  subsequent  holders,  if  instrument  obtained 

through   fraud   or 58 

Immediate  Parties,  delivery  necessary  as  to 16 

Impersonator,  fraudulent,  determination  of  responsibility  for  loss 

when  instrument  issued  or  paid  to 23 

Incomplete  Instrument,  what  blanks  may  be  filled 13,  14 

Not  valid  contract  if  not  delivered 15 

Acceptance   of 138 

(See  Blanks;  Complete). 

Indorsees,  Joint,  indorsement  by 41,  68 

Indorsement,  meaning  of 191 

Anomalous     64 

Note  payable  to  maker's  own  order  not  complete  without 184 

By  corporation  or  infant 22 

Necessary  to  negotiation  of  instrument  payable  to  order 30 

Transfer  of  instrument  without,  effect  of 49 

Transferee  has  right  to  require 49 


408                                           INDEX  I 

Section 
Time  at  which  negotiation  takes  effect  when  obtained  after 

transfer,  without  49 

Must  be  upon  instrument,  or  upon  attached  piece  of  paper...  31 

How   made    31 

Kinds    of    33 

Must  be  of  entire  instrument  or  entire  unpaid  part 32 

Special  indorsement,  what  is 34 

In   blank,   what  is 34 

In  blank,  makes  instrument  payable  to  bearer 9 

In  blank,  how  changed  to  special  indorsement 36 

Restrictive,    what    is 36 

Restrictive,  effect  of 37 

Restrictive,  rights  of  indorsee  under 37 

Qualified,    what    is 38 

Qualified,  effect  of 38 

Qualified,  how  made 38 

Conditional,  right  of  party  required  to  pay  instrument  to  dis- 
regard condition   .39 

Effect  of  special,  upon  instrument  payable  to  bearer 40 

When  instrument  payable  to  two  or  more  separate  persons  or 

as  partners   41 

When  instrument  drawn  or  payable  to  a  person  as  cashier  or 

other  fiscal  officer 42 

Where  name  is  misspelled,  etc 43 

Where  indorsee  or  payee  is  wrongly  designated 43 

By  person  in  representative  capacity 44 

(See  Agent,  Broker). 

Presumption  as  to  time  of 45 

Presumption  as  to  place  of 46 

Striking   out,    effect  of 48 

(See  Indorser,  Negotiation,  Warranty). 

Indorser,  when  person  signing  instrument  deemed  to  be 17,  63 

Anomalous  or  irregular 64 

Discharged,  when,  by  positive  act  of  another  party..  120,  122,  124 

By  failure  to  make  presentment  for  payment 70 

By  failure  to  give  notice  of  dishonor 89 

When  holder  takes  qualified  acceptance  without  his  assent...  142 

By  failure  to  negotiate  or  present  bill  for  acceptance 144 

By  failure  to  make  protest 152 

By  failure  of  holder  to  receive  payment  for  honor 176 

By  discharge  of  one  of  a  set  of  bills 183 

When  holder  procures  certification  of  check 188 

Irregular,   or  accommodation 64 

Liability  of  irregular  or  accommodation 64 

Warranty    of,    when    instrument   negotiated    by    qualified    in- 
dorsement      65 

Liability    of    general 66 


INDEX  409 

Section 
Liability  of  person  who  indorses  an  instrument  which  is  nego- 
tiable  by   delivery 67 

Order  in  which  indorsers  are  held 68 

Liability  of  joint  indorsers 68 

Presentment  for  payment  is  necessary  to  charge 70 

When  not  necessary 80 

Released  if  instrument  payable  on  demand  is  not  presented 

within   reasonable   time 73 

Liability  of,  upon  dishonor  of  instrument 84,  151 

When  notice  of  dishonor  required  to  charge 89 

When  notice  of  dishonor  not  required  to  charge 112,  115 

Waiver  of  notice  by 109 

Payment  of  instrument  by,  effect  of 121 

When  discharged  by  renunciation  by  holder 122 

Discharged  by  alteration  of  instrument 124 

■\\Tien  discharged  if  holder  takes  qualified  acceptance 142 

When  discharged  by  failure  of  holder  to  negotiate  or  present 

bill  for  acceptance 144 

"V\nien  discharged  by  failure  to  protest  bill 152 

Liability  of,  of  parts  of  bills  in  a  set 180 

Infant,  effect  of  indorsement  by 22 

Infirmity,   in  instrument    (See   Title). 

Informal  Instrument,  interpretation  of 10 

Inland   Bill,   what   is 129 

Protest  not  required 118 

Insolvency,   how   presentment  must   be   made   and   notice   of   dis- 
honor given  in  case  of 101,  145 

Of  drawer  or  acceptor,  protesting  instrument  for  better  secur- 
ity       158 

Installments,  instrument  payable  in  is  negotiable 2 

Holder  who  takes  with  notice  after  default  in  payment  of  is 

not  holder  in  due  course 2,  52 

Separate  demand  must  be  made  at  maturity  of  each 71 

Instrument,  interpretation  of , 10 

Meaning  of   191 

Nature  of  to  be  regarded  in  determining  reasonable  or  unrea- 
sonable  time    193 

Interest,  date  from  which  it  runs,  when  instrument  ambiguous..     17 

Sum  not  uncertain  when  instrument  payable  with 2 

May  be   payable   in   installments 2 

Holder   who   takes   after   default   in   payment   of   installment 

not  holder  in  due  course 2 

Default  in  payment  of  may  hasten  maturity  of  instrument 2 

When  not  reserved  in  instrument,  is  payable  after  maturity . .       2 

Alteration  of  instrument  as  to 125 

Irregular  Indorser,  who  is  and  liability  of 64 

(See  Accommodation  Indorser). 
Issue,  meaning  of   191 


410  INDEX 

J.  Section 

Joint  and  Several  Parties,  who  are 17 

As    indorsers    68 

Payees,  how  must  indorse 41 

Joint  Debtors,  presentment  to 78 

Notice  of  dishonor  to 100 

L. 

Language  of  Instrument,  ambiguity  in,  rules  for  construction....  17 

Need  not  follow  Act 10 

Law  Merchant,  definition  and  brief  history  of  codification  of  rules 
in  regard  to  Negotiable  Instruments  will  be  found  in  Introduc- 
tion to  Title  I — 

Rules  of,  govern  in  any  case  not  provided  for  in  Act 196 

Laws,  in  conflict  with  Act  are  superceded 191 

Liabilities   of   Parties 60-69 

Of  maker 60 

Of  drawer   61 

Of  acceptor  62 

Of  irregular  or  accommodation  indorser 64 

Indorser  may  indicate  in  what  other  capacity  he  intends  to  be 

bound    63 

Warrant  by  delivery  or  qualified  indorsement 65 

Warranty  of  general  indorser 66 

Of  person  who  indorses  paper  negotiable  by  delivery 67 

Order  in  which  indorsers  are  liable 68 

Of  agent  or  broker 69 

Of  person  signing  in  trade  or  assumed  name 18 

(See  Signature,  Warranty). 

Lien,  what  is 27 

When  lien  on  instrument  constitutes  holder  for  value 27 

Lien  of  bank  on  customer's  deposits  and  securities 27 

Local  Acceptance,  what  is,  how  may  be  made  and  effect  of 141 

Lost   Instruments,   presentment,  protest  and   notice  when   instru- 
ment lost    74,  160 

M. 

Mail,  notice  of  dishonor  may  be  given  by 96 

Within  what  time  notice  must  be  given  by 103,  104 

When  parties  reside  in  same  place 103 

When   party  giving  and   parties   to   receive   notice   reside   in 

different  places   104 

When  sender  deemed  to  have  given  due  notice  by 105 

ElTect  of  miscarriage  of 105 

Deposit  in  post  office,  what  constitutes 106 

(See  Notice). 

Maker,  who  is 1 

May  be  payee 8 


INDEX  411 

Section 

Joint,  deemed  joint  and  several,  when 17 

note  paj'able  to  order  of,  incomplete  until  indorsed 184 

Admissions    and    liabilities    of 60 

Not  discharged  by  failure  to  present  instrument  for  payment. .  70 

Not  entitled  to  notice  of  dishonor 89 

Marginal  Figures,  effect  to  be  given  to,  when  they  conflict  with 

words    17 

Material,  instrument  may  be  written  or  printed  upon  any  kind  of.  1 
Material  Alteration,    (See  Alteration). 

Memorandum  Check,  what  it  is  and  effect  of 186 

Misspelling,  indorsement  where  name  wrongly  spelled 43 

Money,  instrument  must  be  payable  in 1,  6,  132 

Instrument  may  designate  paj'ment  in  particular  kind 6 

Effect  of  alteration  of  sum  payable 124,  125 

Instrument   may   contain   provision   giving   holder   election   to 

require  something  in  lieu  of  payment  in 5 

Municipal  Securities,  negotiability  of 6, 184 

Liability  of  persons   negotiating 65 

Municipal  Warrants,  payable  out  of  particular  fund,  not  negotiable.  3 

Maturity,  time  of,  how  computed 85 

Instrument  may  be  payable  "on  or  before"  a  fixed  or  determ- 
inable future  time 4 

Not  affected  by  post-dating  or  ante-dating  instrument 12 

N. 

Name,  liability  of  persons  signing  in  trade  or  assumed 18 

Indorsement  where  misspelled 43 

National    Banks,    provisions    of    Federal    Reserve    Act    concerning 
acceptance  by,  will  be  found  in  the  Introduction  to  Title  II. 

Negotiability,  meaning  of,  is  given  in  introduction  to  Title  I — 

what  provisions  in  instrument  impair  or  destroy 3,  4,  5 

what  provisions  do  not  affect 2,  3,  4,  5,  6 

Effect  of  omission  of  words  of,  from  indorsement 34,  36 

Of  instrument,  negotiable  in   its  origin,  continues  until  paid 
or   restrictively   indorsed 47 

Negotiable  Instrument,  meaning  of  term 191 

General  provisions  as  to  Form  and  Interpretation 1-23 

General  provisions  as  to  Consideration 24-29 

General  provisions  as  to  Negotiation 30-50 

General  provisions  as  to  Rights  of  Holder 50-59 

General  provisions  as  to  Liabilities  of  Parties 60-69 

General  provisions  as  to  Presentment  for  Payment 61-88 

General  provisions  as  to  Notice  of  Dishonor,  of 89-118 

General  provisions  as  to  Discharge  of 119-125 

Negotiable  Instruments  Law,  brief  history  of,  in   introduction  to 
Title  I— 
Title  known  by 190 


412  INDEX 

Section 
Does  not  apply  to  instruments   made  and   delivered   prior  to 

the  taking  effect  thereof 195 

Rule  for  interpretation  and  application  of 191 

Negotiation     30-50 

What  constitutes   30 

Transfer  without  indorsement 49 

When  prior  party  may  negotiate  instrument 50 

After  payment  by  party  secondarily  liable 121 

Of  different  parts  of  a  set  of  bills,  rights  of  holder 179 

(See  Indorsement,   Indorser). 

Non-existing  Person,    (See  Fictitious  Person). 

Non-Negotiable    Instruments,    distinguished 3 

Notary  Public,   protest  by 154 

(See  Protest). 

Note,   meaning  of 191 

(See  Promissory  Note). 

Notice,   signature   "by   procuration""  is   of  itself  notice   of  limited 

authority  of  agent  so  signing 21 

What  constitutes  notice  of  defect  in  instrument  or  title 56 

Notice   of  Dishonor 89-118 

To   whom  must   be   given , . .     89 

By  whom,   given 90 

Given  by  agent 91,  94 

Effect  of  notice  given  on  behalf  of  holder 92 

Effect  where  given  by  party  entitled  thereto 93 

Agent  may  give  notice  to  his  principal 94 

Principal    has    then    same    time   from    its    receipt    himself    to 

give  notice  to  other  parties 94 

When  notice  sufficient 95 

Effect  of  misdescription  of  instrument 95 

Written  notice  may  be  supplemented  by  verbal  communication.     95 

Form  of   96 

May  be  in  writing  or  merely  oral 96 

May  be  delivered  personally  or  by  mail 96 

To  whom  may  be  given 97 

How  given  to  partners 99 

How   given    where    party    dead 98 

How  given  to  persons  jointly  liable 100 

How  given   to  bankrupt   or  insolvent 101 

Time  within  which  must  be  given 102 

Time  within  which  must  be  given,  where  parties  reside  in  same 

place    103 

Time  within  which  must  be  given  when  parties  reside  in  differ- 
ent places    104 

When  sender  deemed  to  have  given  due  notice 105 

Effect  of  miscarriage  in  the  mails 105 

What  constitutes  deposit  in  post  office 106 


INDEX  413 

Section 
Within    what   time   party    receiving   notice   must    give    notice 

to  prior  parties 107 

Where  must  be  sent 108 

Where  must  be  sent  if  address  added  to  signature 108 

Where  must  be  sent  if  no  address  given 108 

Where  must  be  sent  if  party  live  in  one  place  and  has  place 

of  business   at  another 108 

Where  must  be  sent  if  party  is  sojourning  at  temporary  place 

of   residence    108 

Is  sufficient  wherever  sent  if  actually  received  by  party  within 

time  specified  in  Act 108 

May  be  waived 82,  110 

When   waiver  implied 82 

Waiver  of  protest  includes Ill 

When   dispensed   with    112,  114,  115 

When  delay  in  giving  excused 113 

When  need  not  be  given  drawer 114 

When  need  not  be  given  indorser 115 

When  need  not  be  given  after  instrument  has  been  dishonored 

by    non-acceptance    116 

Effect  of  omission  to  give  notice  of  non-acceptance 117 

Notice  of  Equities,  what  constitutes 56 

Rights  of  holder  when  part  consideration  paid  before 54 

Noting  for  Protest,  what  is  and  effect  of 155 

(See  Protest.) 

O. 

Office,  instrument  may  be  payable  to  holder  of,  without   designa- 
tion   by    name 8 

Instrument  payable  to  holder  of,  is  payable  to  order 8 

How   such   an   instrument   negotiable   and   to   whom   payment 

may  be  made 8 

Officer,  of  bank  or  corporation,  negotiation  and  indorsement  by..     42 
Omissions,   what  and  when   do  not  affect  validity  and   negotiable 

character  of  instrument 6 

Of  time  at  which  payable,  effect  of 7 

Of  date,  presumption  in  that  case 17 

Right    to    fill    in    blanks 14 

(See  Blanks). 

Option,  to  require  payment  "on  or  before" 4 

Or  election  by  holder  to  require  something  to  be  done  in  lieu 
of  payment  in  money,  instrument  may  contain  such  a  provi- 
sion           5 

To  declare  instrument  due  on  failure  to  pay  interest  or  in- 
stallment      2,  52 

To  treat  instrument  as  bill  or  note 17,  130 

Order,  when  instrument  payable  to 1,  8 


414  INDEX 

Section 
Overdue,    when    instrument   is,    upon    default   in    payment    of   in- 
stallment     2,  52 

When  demand  instrument  is 7,  52,  53,  71,  144,  193 


Partial  Acceptance,  what  is,  how  may  be  made  and  effect  of 141 

(See  Acceptance). 

Particular  Facts,  and  nature  of  instrument  to  be  regarded  in  de- 
termining what  is  reasonable  or  unreasonable  time 193 

Parties,  to  instrument 1,  60 

Liabilities    of    60-69 

(See  Liabilities  of  Parties). 

Alteration  of  instrument  by  change  in  number  or  relation  of.  125 

(See  Alteration  of  Instrument). 

Partners,  indorsement  of  instrument  by 41 

Presentment  to  persons  liable  as 77,  145 

Notice  to    99 

Payee,  who  may  be 8 

As  holder  in  due  course 59 

Must  be  named  or  described  with  certainty 8 

When  holder  of  oflBce,  negotiation  by 8 

Effect  of  making  instrument  payable  to  fictitious  or  non-ex- 
isting  person    9 

Effect  when  name  of  payee  does  not  purport  to  be  name  of  any 

person    9 

How  instrument  must  be  indorsed  when  two  or  more  are  named 

who  are  not  partners , 41 

Existence  of,  and  capacity  to  indorse  admitted  by  signature  of 

maker    gO 

Same,  by  signature  of  drawer 61 

Same,  by  signature  of  acceptor 62 

Presumption  when  instrument  is  indorsed  by  joint  payees 68 

Liability  of  accommodation  indorser  to 64 

Payment,  time  of  maturity,  how  computed 86 

In  due  course,   what  is 88 

Discharge  by   51,  119 

By  accommodated  party,  effect  of 119,  121 

Tender  of,  discharges  person  secondarily  liable 120 

Effect  of  alteration  of  medium  of 125 

(See  Alteration  of  Instruments). 

Of  bill  in  a  set 182,  183 

(See  Presentment  for  Payment). 

Payment  for  Honor, 171-177 

What  is,  when,  by  whom  and  for  whom  it  may  be  made 171 

How  made    172,  173 

To  whom  preference  must  be  given  when  more  than  one  offer.  174 
Rights  of  person  making 175,  177 


INDEX  415 

Section 

Effect  on   subsequent   parties 175 

Effect  of  refusal  to  receive 176 

Person,  meaning  of 191 

Fictitious  or  non-existing  as  payee 9 

Fictitious,  as  drawee,  bill  may  be  treated  as  promissory  note.  130 
Indorsing  instrument  negotiable  by  delivery,  liability  of 67 

Person  Primarily  Liable,  who  is 70,  192 

Presentment  for  payment  not  necessary  to  charge 70 

Exception    70 

Person  Secondarily  Liable,  who  is 192 

Liability  of,  when  instrument  dishonored 84 

Discharge  of  120 

Recourse   against    84,  151 

(See  Notice  of  Dishonor). 

Personal  Representative,  who  is,  of  deceased  person,  presentment 

for  payment  to 76 

Notice  of  dishonor  to 98 

Presentment  for  acceptance  to 144 

Place,  omission  to  specify  where  drawn  or  payable,  does  not  affect 

validity  or  negotiability 6 

Presumption   in   that  case 6 

Of  indorsement,  presumption  as  to 46 

Of  presentment  for  payment 72,  73 

Of  presentment  for  acceptance 143,  145,  147 

Alteration  which  changes,  is  material 125 

Demand,  when  instrument  payable  at  special 70 

Effect  of  acceptance  to  pay  at  a  particular 140,  141 

Post-Dated  or  Antedated  Instrument,  is  not  invalid 12 

Of  what  date  holder  acquires  title 12 

Time  of  maturity  not  postponed 12 

May  be  negotiated  at  any  time  after  delivery 12 

Not  notice  of  irregularity  or  fraud 12,  56 

Post  Office,  what  constitutes  deposit  in 106 

Effect  of  miscarriage  of  mails 105 

Pre-Existing,  or  antecedent  debt,  what  is 25 

Constitutes   value    25 

Presentation,  instrument  payable  on,  is  payable  on  demand 7 

Presentment  for  Acceptance,  provisions  respecting 143-151 

When  must  be  made 143 

When  failure  to  present  releases  drawer  and  indorsers 144 

When  failure   to  negotiate  bill  or  present  it  releases  drawer 

and    indorsers    144 

How   made    145 

On  what  days  may  be  made 146 

When  time  is  insufficient 147 

When    excused     148 


416  INDEX 

Section 

Presentment  for  Payment,   provisions   respecting 70-88 

Effect  of  failure  to  make  demand  on  principal  debtor 70 

Whien  must  be  made  if  instrument  is  payable  on  demand  and 

wlien  not  payable  on  demand 71 

When  must  be  made  of  bill  of  exchange  payable  on  demand.     71 

What  is  reasonable  time  within  which  to  make 71 

No  distinction  between  demand  instruments  payable  with  or 

without    interest     71 

When    instrument   payable   in    installments 71 

What   constitutes   sufficient 72 

By  whom  where,  at  what  time,  and  to  whom  must  be  made..     72 

What  is  proper  place  for 73 

Instrimient  must  be  exhibited 74 

Of  instrument  payable  at  a  bank 75 

Where  principal  debtor  is  dead 76 

To  persons  liable  as  partners 77 

To  joint  debtors 78 

When  not  required  to  charge  drawer 79 

When  not  required  to  charge  indorsers 80 

When  delay  in  making  is  excused 81 

Must  be  made  promptly  when  cause  of  delay  is  removed 81 

When   dispensed   with 82 

When  to  be  made  if  instrument  matures  on  Saturday,  Sunday 

or    a    holiday 85 

Time   of,    how   computed , 86 

How  made  to  acceptor  for  honor 168 

When  delay  in  presenting  to  acceptor  for  honor  excused 169 

Of   certificate   of   deposit 184 

Of  check,  within  what  time  must  be  made 186 

Of  check,  effect  of  failure  to  make 186 

To  what  extent  drawer  is  released  by  failure  to  make 186 

Presumption,  of  consideration,   (See  Consideration)  — 

As  to  date H 

As  to  right  to  fill  up  blanks 14 

As  to  delivery 16 

As  to  time  when  indorsement  was  made 45 

As   to   negotiation 45 

As  to  place  of  indorsement 46 

As  to  holder  in  due  course 59 

As  to  order  in  which  indorsers  are  liable 68 

As  to  arrival  of  notice  of  dishonor  duly  addressed  and  depos- 
ited in  post  office 105 

Primary  Party,   (See  Persons  Primarily  Liable). 

Principal,  signature  of  may  be  made  by  authorized  agent 18,  19 

Authority  of  agent,  how  shown 19 

(See  Agent). 

Liability  of  persons  signing  by  agent 20 


INDEX  417 

Section 

Signature  by  "procuration,"  effect  of ^ 21 

(See  Agent). 
Procuration,  signature  by,  and  effect  of 21 

(See  Agent). 
Promissory   Note,    defined 184,  191 

Payable  to  makers  own  order  not  complete  until  indorsed  by 
him    184 

When  bill  of  exchange  may  be  treated  as 17,  130 

Protest    152-160 

When  need  not  be  made 118 

In  what  cases  must  be  made 118,  152 


How  made 


153 


What   must    specify 153 

By  whom  made 154 

If  made  by  person  other  than  a  notary  must   be  attested  by 

witnesses 154 

When  to  be  made 155 

Where  to  be  made 156 

May  be  made  both  for  non-acceptance  and  non-payment 157 

When  may  be  made  for  better  security 158 

When  delay  in  making  excused 159 

How   made   where   instrument   is   lost,   destroyed   or   wrongly 

detained    160 

Waiver  of,   what  includes HI 

Of  bill  accepted  for  honor 167 

Upon  dishonor  by  acceptor  for  honor 170 

Provisions  of  Instrument,  ambiguity  or  conflict  in,  what  rules  of 
construction  govern   17 

Q. 

Qualified  Acceptance,  what  is,  how  may  be  made  and  effect  of 141 

(See  Acceptance). 
Qualified  Indorsement,  what  is,  how  made  and  effect  of 38 

Warranty  of  person  negotiating  instrument  by 65 

Quasi-Negotiable    Instruments;    Bills    of   Lading;    Warehouse    Re- 
ceipts; Certificates  of  Stock)  — 

(The  References  Here  Are  to  Pages) 
Bills  of  Lading — 

Negotiable  Bill  of  Lading—  Page 

Definition  and  form  of 305 

What   must   contain 306 

May  not  be  issued  in  sets,  excepting  to  Alaska. 307 

Negotiation  by  indorsement  or  delivery 308 

When  negotiable   308 

Duplicate  bills  must  be  plainly  stamped  "Duplicate"..   316 

Liability  of  carrier  for  failure  to  so  mark  them 316 

When  carrier  bound  to  deliver  goods 309 


418  INDEX 

Page 
Carrier    not    required    to    deliver    unless    bill  Is    sur- 
rendered       309 

Liability  of  carrier  for  wrongful  delivery 309 

Duty  of  carrier  to  take  up  and  cancel  bill 310 

Duty  of  carrier  when  only  partial  delivery 310 

Delivery,  how  obtained  when  bill  lost 310 

Duty  of  carrier  when  rival  claimants  to  goods 311 

Liability  of  carrier  when  negotiable  bill  issued  with- 
out receipt  of  goods  or  for  failure  of  goods  to  coi-- 

respond  to  description  in  bill 311 

Exception  when  "shipper's  load  and  count" 312 

Transfer  of  Bill- 
Title  acquired   by   transfer 312 

Right  to  require  indorsement 313 

Warranty  of  indorser  implied  by  indorsement 313 

Indorser    not.  liable    for    obligations    of    previous    in- 
dorser        314 

Rights  of  holder  without  notice  of  fraud,  etc 314 

What  bill  indicates  as  to  ownership  of  goods 315 

Draft  with  Bill  of  Lading  Attached — 

"When  bill  must  be  surrendered 315 

Non-negotiable  or  "straight  bill"  must  be  so  marked 317 

Warehouse  Receipts — 

Definition  of  warehouse  receipt 318,  319 

Negotiable  and  non-negotiable  receipts 320,  321 

Duplicate  receipts  must  be  so  marked 321 

Duty  of  warehouseman  to  deliver  goods 321 

Lien  of  warehouseman 322 

Loss   of  lien 322 

Enforcement  of  lien 323 

Demand  and  notice  of  intention  to  satisfy  lien 323 

Auction  sale  of  goods  to  satisfy  lien 324 

Disposal  of  proceeds  of  sale 325 

Sale  of  perishable  goods 325 

Obligation  to  deliver  ceases  upon  sale  of  goods 325 

Proper  and  improper  delivery  of  goods 326 

Liability  of  warehouseman  for  failure  to  cancel  receipt...   326 

Lost   receipt    327 

Warehouseman  cannot  claim  title  to  goods  in  himself....   327 

Right  to  interplead  adverse  claimants 328 

Liability  of  warehouseman  for  non-existence  of  goods  or 

failure  to  correspond  to  description 328 

Duty  to  keep  goods  of  each  depositor  separate 329 

Except  fungible  goods,  as  grain,  iron,  etc 329 

Alteration  of  receipt,  effect  of 329 

Negotiation  of  receipt  330 

By   whom  negotiable 331 


INDEX  419 

Page 

Rights  of  holder ^^^ 

Right  to  require  indorsement 332 

Warranty   of   transferer 332 

Liability  of  indorser,  pledgee  or  mortgagee 333 

Negotiation  in  breach  of  duty  or  by  mistake 333 

By   what   laws   interpretation   of   warehouse   receipts   are 

004 
governed  

Penalties    for    fraud 334 

Certificates  of  Stock- 
Transfer — 

.  Methods  of  effecting  transfer 338 

Unregistered  transfer  conveys  legal  title 338 

Liability  of  registered  owner  after  sale  of  shares 339 

Transfer  of  certificate  by  anyone  having  possession..  341 

Effect  of  indorsement  of  certificate 341 

Right  of  owner  to  reclaim  certificate  fraudulently  pro- 
cured     • ^^^ 

Title  obtained  by  transferee  of  certificate  so  procured.  342 

Transfer  by  agent  of  owner 342 

Right  of  purchaser  to  compel  indorsement 343 

Warranties  implied  from  transfer 344 

Attachment    of    certificate;    levy    of    execution,    when 

valid    344 

Lien  of  corporation  on  shares 345 

Lost   certificate    346 

Transfer  by   infant  or   other  person   under  disability 

or  wanting  in  capacity 346 

Transfer  by  executor,  administrator  or  guardian 347 

Alteration   of  certificate ; 347 

Pledge  of  Stock;   nature  of 347 

Right  of  pledgee  to  obtain  transfer 348 

Right  of  pledgee  to  collect  dividends 348 

Duty  to  retain  pledge 349 

Right  of  pledgee  to  vote  shares 349 

Right  to  assign  pledge 350 


Pledge  by  executor,  etc. 


350 


Remedies  of  pledgee  when  debt  unpaid 350 

Sale  of  pledge 351 

Pledgor  entitled  to  notice  of  sale 351 

Pledgee  may  not  buy  at  own  sale 351 

Risk  in  purchasing  stock;  purchase  from  co-partners 352 

Purchase  from  officer  or  director  of  corporation 352 

Purchase  at  sheriff,  assignee  or  bankrupt  sale 353 

Purchase  from  pledgee  or  taking  re-pledge 353 

Purchase     from     executor,     administrator,     or     guar- 
dian      354,  355 

Purchase   from   trustee 355 


420  INDEX 

Page 

Purchase  of  lost  or  stolen  certificates 356 

Refusal  of  corporation;  to  transfer  shares;  right  to  refuse 

transfer     357 

Refusal  of  transfers  to  or  from  infants  or  other  per- 
sons   under    disability 358 

Refusal  of  transfers  by  executors,  etc 358 

Refusals  of  transfers  by  trustees 359 

May  refuse  transfer  unless  certificate  surrendered....   360 

Transfer  by  order  of  court 361 

Transfer  on  forged  signature 361 

R. 
(The  References  are  again  to  Section   Numbers)         Section 

Ratification  of  Unauthorized  Signature 19,  23 

Reasonable  Diligence,  what  is ''6 

(See  Diligence). 

Reasonable  Time,  what  constitutes  and  how  determined.  ..  .53,  71,  193 

As  affected  by  usage  of  trade 193 

No  fixed  rule  given "71 

For  presentment  of  demand  note 71 

Effect  of  failure  to  make  presentment  within 144 

For  presentment  of  bill  of  exchange 71 

For  presentment  of  check 186 

Effect  of   delay    to   present    or    negotiate    instrument   payable 
upon    demand    beyond 53 

Recourse,  indorsement  "without  recourse" 38 

Warranty   of   person   negotiating   instrument   by   qualified    in- 
dorsement          65 

Holder's  right  of,  upon  dishonor  of  instrument 84,  151 

Referee  in  Case  of  Need,  defined,  and  purpose  of  reference 131 

Bill  obtaining  reference  must  be  protested  before  presenting  to.  167 
Holder  may  disregard  reference 131 

Refusal,  to  return  bill,  effect  of 137 

Re-issue  and  Re-negotiation  of  Instrument,  when  party  may 50 

Instrument   is   not   enforceable   against   certain   parties,    upon 

re-issue    50 

By  secondary  party  who  pays  instrument 121 

Release  of  Parties,   (See  Discharge). 

Renunciation,  of  rights  by  holder,  how  made  and  effect  of 122 

When  does  not  affect  rights  of  holder  in  due  course 122 

Must  be  in  writing  or  instrument  must  be  delivered  to  person 

primarily    liable    thereon 122 

Effect     of,     upon     parties     secondarily     liable     upon     instru- 
ment     119,  120,  122 

Restrictive  Indorsement,  what  is,  how  made  and  effect  of 36 

Rights  acquired  by  indorsee  under 37 

Destroys  negotiable  character  of  instrument,  when 37,  47 


INDEX  421 

S.  Section 

Saturday,  Sunday  or  Holiday,  when  instrument  falling  due  on  must 

be  presented  for  payment 85 

Presentment  for  acceptance  on 146 

How  time  computed  when  last  day  for  doing  any  act  falls  on..  194 

Seal,  negotiable  instrument  may  bear 6 

Secondary  Parties,   who  are 192 

(See  Person  Secondarily   Liable). 
Securities,   warranty  as   to   public   or   corporation,   negotiation   of, 

other  than  bills  and  notes 65 

Bonds  and  interest  coupons  are  negotiable 6, 184 

Separate  Paper,  acceptance  upon,  is  valid 134 

Indorsement  written  upon  must  be  attached  to  instrument....     31 

Sight,  instrument  is  payable  on  demand  if  payable  at 7 

Instrument  is  payable  at,  if  issued,  accepted  or  indorsed  when 

overdue,   as   to   whom 7 

Bill  payable  after  sight  must  be  presented  for  acceptance  to 

fix   maturity    143 

Instrument  payable  elsewhere  than  residence  or  usual  place 
of  business  of  drawee,  must  be  presented  for  acceptance  be- 
fore being  presented  for  payment 143 

Signature,  no  person  liable  upon  instrument  unless  it  bears  his. ...     18 

By  trade  or  assumed  name,  liability  of  person  so  signing 18 

By  agent    18 

Authority  of  agent,  how  shown 18 

Liability  of  persons  signing  by  agent 19 

How  interpreted  when  effect  uncertain 17 

By  "procuration,"  effect  of 21 

Of  person  as  agent,  or  in  representative  capacity 20 

(See  Agent,  Procuration). 

Of  infant  or  corporation .  -. 22 

Forged,  effect  of 23 

Made  without  authority,  effect  of 23 

(For  Warranties  and  admissions  implied  by  Signature,  see 
under  Warranty). 

Spoliation,  of  instrument,  effect  of  alteration  by  stranger 125 

Striking  Out,  indorsement,  effect  of 48,  121 

Sum,  certainty  as  to,  what  constitutes 2 

Sunday,  Saturday  or  Holiday,  instrument  made  on 52 

W^hen  instrument  falling  due  on  must  be  presented  for  pay- 
ment         85 

Presentment  for  acceptance  on 146 

How  time  computed  when  last  day  for  doing  any  act  falls  on. .   194 

T. 

Tender,  what  is  valid 120 

As  discharge  of  party  secondarily  liable 120 

When  ability  and  willingness  to  pay  at  a  special  place  operates 
as    70 


422  INDEX 

Section 
Of  payment  for  honor,  effect  of  refusal  to  receive 176 

Terms  of  Instrument,  and  language  used,  need  not  follow  act 10 

Informal  instruments  are  negotiable,  when 10 

Time,  of  indorsement,  presumption  as  to 45 

Of  negotiation,  presumption  as  to 45 

Of  maturitj%  provisions  as  to 85 

How  computed   86 

When  Act  takes  effect  and  instruments  to  which  it  is  applic- 
able   195 

Title,  when  passes  if  instrument  requiring  indorsement  is  trans- 

fered   without   indorsement 49 

When   defective    55 

What  constitutes  notice  of  defect  in 54,  56 

(See  Equities,  Notice). 

Notice  of  defect  before  full  amount  paid ■ .     54 

Rights  of  holder  in  due  course  when  title  defective 57 

Of  person  who  acquires  through  holder  in  due  course 58 

Burden  of  proof  when  title  of  any  person  is  shown  to  be  defec- 
tive        59 

Exception     59 

Acquired  by  subsequent  indorsees  after  restrictive  indorsement.     37 
Of   Act    190 

Trade  Name,  liability  of  person  signing  by 18 

Transfer,  without  indorsement,  effect  of 49 

By  broker,  without  indorsement,  liability  of  broker 65,  69 

(See  Delivery,  Indorser). 

Trust,  effect  of  restrictive  indorsement  creating ;     36 

Trustee,  instrument  payable  to  not  commercial  paper 8 

Notice   of   trust    capacity    carried    by    instrument    payable    to 
officer    of    corporation 42 

U. 

Unconditional,  when  promise  or  order  is 3 

Undisclosed  Principal,  liability  of  agent  who  signs  without  disclos- 
ing name  of   20 

(See  Agent). 

Uniform    Negotiable   Instruments   Law,    brief   history   of,    will    be 
found  in  Introduction  to  Title  I. 

Usage  of  Business,  or  trade,  to  be  regarded  in  determining  what 
is  or  is  not  reasonable  time 193 

V. 

Validity  of  Instrument,  provisions  which  do  not  affect 6 

Value,  meaning   of 191 

Instrument    need    not    contain    words    "value"    or    "value    re- 
ceived"     '• 6 

What   constitutes    25 


INDEX  423 

Section 

Antecedent  or  pre-existing  debt  as 25 

Holder  for,  what  constitutes 26 

Holder  who  has  a  lien  upon  instrument  deemed  holder  for.  ...  27 

Accommodation  party  liable  although  he  receives  no 29 

(See  Consideration). 

W. 

Waiver,  of  benefit  of  any  law  for  protection  of  obligor  does  not 

impair  validity  or  negotiability  of  instrument 5 

Presentment  for  payment  dispensed  with  by 82 

How  expressed   82 

Of  notice  of  dishonor 109 

Time   of    109 

Contained  in  instrument,  binds  all  parties 110 

Written  above  signature  of  indorser,  binds  him  only 82,  110 

Of  protest  deemed  to  be  waiver  of  presentment  and  notice  of 

dishonor  also    Ill 

Warehouse  Receipts,    (See  Quasi-Negotiable  Instruments). 
Warrant,  Municipal,  payable  out  of  particular  fund  not  negotiable 

instrument    3 

Warranty,   where  instrument   negotiated   by   delivery   or   qualified 

indorsement    65 

Upon  sale  of  securities  of  public  or  private  corporation 65 

Of  general   indorser 66 

And  liability  of  person  indorsing  an  instrument  which  is  ne- 
gotiable   by    delivery 67 

Engaged  in  by  broker  or  agent  who  negotiates  without  indorse- 
ment      69 

"Without  Recourse,"  effect  of  such  indorsement  and  how  made 38 

Writing,  what  includes 191 

Renunciation  must  be  in,  unless  instrument  surrendered 122 

Acceptance  must  be  in 132 

Written  Parts,  of  instrument  prevail  over  printed  parts  if  there  is 

conflict    17 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


AA    000  802  120 


